If people want to establish credit or rebuild the bad credit history, it is obvious that secured credit cards are perfect for them. People have realized that they can gain a lot of benefits by using a secured credit card. But when it comes to choosing the right secured card, I guess most people may not familiar with how to use it to build or rebuild credit. So, I write this post as a simple secured credit card guide for consumers.

What is a Secured Credit Card?
To open a secured account, the applicant must make a deposit in his/her savings account. This serves as a guarantee that in case of default, the card issuer can use the cash deposited to pay the unpaid charges. Hence, the value of your security deposit will also determine the amount of credit limit you can enjoy.

Some issuers will match the value of your deposit while other issuers may give a slightly lower or higher credit limit than the value of the security deposit. However, unlike prepaid debit cards, a secured cardholder can be charged with interest rates each time the outstanding balance is not paid in full.

Why Apply for a Secured Credit Card?
If you want to rebuild your bad credit history or simply establish your personal credit history, then applying for secured credit card is the easiest way to do so. Issuers offer quick and instant approval as long as the required security deposit has been submitted.
What about those who have just filed for bankruptcy? Although secured cards are offered to people with bad credit, those with a record of bankruptcy may be declined. You may have to wait until you have been discharged from bankruptcy before you can get approved for a secured credit card. During this time, you may consider getting a prepaid debit card. Nevertheless, as soon as you are discharged, a secured credit card is the best tool to help you regain your lost credit history.

Secured credit cardholders are not allowed to exceed their credit lines. This limitation can prove to be useful for people who have a problem controlling their spending. And just like a regular credit card, it can be used for payment or purchase anywhere credit card payment is accepted. No one will be able to tell that you are using a secured card because you have bad credit.

Purchasing the Right Secured Credit Card
The best secured credit card is one with no annual fee and no hidden charges. However, you may find that some secured cards do carry acceptable annual fees. Secured cards are also expected to have slightly higher interest than regular credit cards. Nevertheless, avoid cards that impose unreasonably high APRs. By shopping around, you should be able to make the right choice.

Spend time reading and understanding the fine print. More importantly, make sure that your payments will be reported to the major credit bureaus as it is the only way you can build/rebuild your credit history.

After at least 6 to 12 months of consistent payments, you should be able to qualify for an unsecured account. Thus, you can enjoy lower interest rate, higher credit limit, and other privileges not given to secured cardholders. What’s more, you can rebuild the bad credit history and gain a whole new credit.

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