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Possession of credit cards enables people
to take advantage of the numerous benefits offered.
In many developed countries, credit cards have become a primary
way of paying for goods and services and in some places, including
the U.S., Japan and others, credit cards have made “old
forms of payment” like writing a check or paying cash almost
obsolete. Credit cards as a means of payment is also conquering
less developed countries, and it is fast becoming a “money
making machine” for banks. Another reason for the increasing
widespread use of credit card accounts is the fact that a credit
card is proof of financial responsibility and a necessity for
renting a car, booking a hotel room or purchasing an airline ticket.
Getting your first credit card.
Credit card accounts are essentially unsecured loans, and banks
offer them to people with established credit. There’s no
collateral that guarantees the repayment of the loan. For most
people, it is quite hard to get their first credit card if they
have no credit history. The exceptions include students who are
enrolled in college at the time of applying for a credit account.
Opening a secure credit card account.
For people with no credit history, a secure credit card is an
excellent way of getting their first card and establishing credit.
However, before the credit card application is approved,
one needs to open a savings account which will act as collateral
in case the money owed to the bank is not repaid on time. The
bank will issue a credit
card in your name and keep track of how you handle the account.
If you do not fail to pay as agreed, with time, your credit line
will increase and eventually the bank will return the original
deposit. The process takes at least 12 months depending on the
bank.
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Secure credit card fees, terms, and credit limit.
Secure credit accounts are opened on much worse terms than credit
cards offered to people with good credit history. Most of them
have annual fees ranging from several to, in some cases, over
100 dollars. The annual fee appears on the first statement. Your
credit limit is the amount of the bank deposit. Many secured credit
cards allow only a portion of the credit limit to be used for
cash advances, which is a bit ironic, since the bank is already
holding your money.
Other terms for a secured credit card are similar to regular
credit card accounts. They have a fee for going over the credit
limit, and fees for taking cash advances. If the card carries
a balance, the minimum monthly payment is set at 5 percent or
less of the overall credit
limit. Secure credit cards usually do not offer perks that regular
cards do, like earning mileage with airlines, or getting cash
back on purchases. However, some banks offer secure gold credit
cards, which have a set of privileges, e.g. collision waiver
protection if you use the card to rent a car.
All credit cards, whether secure or non-secure, have
standard consumer protections against dishonest merchants and
bad merchandises. But those protections are usually limited
to the area where the card holder lives.
Credit accounts can help fix damaged credit.
There are situations in life when someone’s credit is
damaged to the point that some or all credit accounts are closed
by the creditors. A secure credit card can be the only way of
getting back on the path of fixing one’s credit in order
to be able to get loans in the future. Fixing bad
credit with a new secure credit card account is a future ticket
to financing big purchases, which might include a car
or a house.
Related topics: prepaid credit card, credit
card debt management, comparing credit cards,
credit
facts for consumers
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