Let’s take a quick look at what secured credit cards are and the benefits of using them. As most people know, traditional credit cards are issued based on your credit. The better your credit history is, the more likely you are to get a credit card with a higher spending limit and a lower interest rate. Makes sense right? If you have a good credit history then lenders see you as a good dependable customer and are willing to give you better terms.
How to get a credit card if you have bad credit?
If you are in an unfortunate situation whTheere you don’t have good credit then your options for getting a credit card may be greatly limited. Depending on what you need a credit card for, a secured card may be the answer for you. If you are in a financial crunch and you simply need to find cash to pay expenses then this is not your solution. You would need to look for other means of finding money. However, if you have bad credit and your primary goal at the moment is improving your credit then secured credit cards can be very useful. If you simply want to diversify your credit portfolio then this is another reason why you might want to use a secured credit card from your bank. But let’s focus on the credit improvement benefit.
A secured credit card is backed by cash that you keep in a bank account. It’s not backed by your credit and therefore if you have at least $300 (of course depending on your bank) available to deposit into an account then you are pretty much guaranteed to get a secured credit card. Of course, not all banks provide these so you need to first make sure that your bank does. As an example, many people use secured credit cards through Fifth Third Bank and Bank of America.
Although, these cards are backed by cash in your account, they are actual credit cards and not debit cards. This means that any merchant that you use such card with will not know the difference. As long as you make your payments on time, your bank will be reporting your good credit history to the three credit bureaus, which over time will improve your rating. And as long as you’re using this card, that initial deposit money will remain frozen in that account. If one day you decide you no longer need this card, you can just tell your bank and they will cancel the card and unfreeze that account so that you can get the cash back.