How to Choose a Secured Credit Card

Not having a credit card can make your life difficult because some businesses – like airlines and car rental places, for example – only accept credit cards. It could be even worse if you have a bad credit score. Fortunately, there is an option for those people – a secured credit card.

What is a secured credit card?

It is a card where you are asked a security deposit to cover the losses in case you fail to pay your balance. Because of that, it’s easier to qualify if compared to a regular unsecured card.

Make sure it helps to build your credit score

The best thing about most secured credit cards is their ability to build or re-establish credit. Check if the credit card you want reports to the major credit bureaus – Equifax, Experian, and TransUnion, since some networks only compile and report those histories.

Understand the fees

There is a variety of charges, so it’s essential to compare the options. Annual fees, for example, could vary a lot, they’re usually between $29 and $45. Also, check the annual percentage rate to see if it is not too high. Investigate if they offer a grace period – which is a period where they don’t charge interest – which is often 25 days.

How much money will you have to put down?

You don’t have to have a lot of money to get a credit card – many issuers offer low security deposits such as $200 to $500.

What will your credit limit be?

Secured credit cards don’t offer high credit limits – it will depend on how much money you put down. After some time issuers may allow you to convert to an unsecured credit card with more benefits – such as cash back and travel rewards.

What’s the interest rate?

Don’t forget to check the APR – the annual percentage rate, which tends to be high on secured credit cards. This is very important because it interferes with the final cost of carrying a balance. Don’t expect the same interest rate that unsecured cards tend to offer – it will be a bit higher than that. You can avoid it by paying the balance in full each month.

Does a reputable institution offer it?

See if the card is offered by a reputable bank or institution since some issuers try to take advantage of the customer’s situation. Compare the rates and read the agreement carefully before making a decision.

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