Secure Credit Cards For Bad Credit Borrowers

admin — Sat, 26 Sep 2009 00:47:06 +0000

Secure credit cards, sometimes referred to as pre paid credit cards, are a wonderful way to improve your credit whether you have very poor credit or very good credit. Please note in advance that secured credit cards are different than pre paid debit cards, and if you have some money you wish to use to receive a Visa or Mastercard, you should always opt to use a secure credit card.

How Prepaid Credit Cards Work

Secure credit cards are fully functional credit cards that are backed up by a deposit with the issuing company. A company offering a secured credit card will not check your credit when you apply, and you should never allow a company to perform a credit check in the application process. This is because a credit check will lower your credit score for a few months, and your main goal in getting a secure credit card in most cases is to improve your credit.

How Secure Credit Cards Work

You have a deposit amount, generally a minimum of $250. You take the deposit to a bank (or apply online) and you will be issued a credit card with a limit that is equal to the size of your deposit. This credit card will operate like any other card; you will have the ability to take out cash advances, buy goods online, and use it anywhere that accepts credit cards. You are required to pay interest on the purchases you make, and you generally cannot access your deposit. You are able to close the credit account at any time, and your deposit will be used to pay any remaining balance on your card. If you do not have a balance, you will receive your deposit in full.

Why Use A Secure Credit Card?

Because pre paid credit cards do not require credit checks, they are the ideal credit building tool for those with poor credit. Every month that you have a secure credit card, the issuing bank will report to all three credit reporting bureaus that you have a credit account in good standing. The credit agencies do not differentiate between a “real” credit card and secured credit cards, so your credit rating will go up even in the first few months after receiving your card. Additionally, for those who do not have a credit or debit card, a secure credit card gives you the ability to make purchases online, sign up for magazine subscriptions easily, and pay at restaurants without using cash. A secure credit card is just like any other credit card in offering you full protection against theft and fraud.

Even better, using a pre paid credit card allows you to build a relationship with a financial services company. Many people who use a secure credit card are offered credit increases on the card, offers for real credit cards, and easier access to different types of loans like personal and auto loans.

If you have poor credit, a secure credit card is a wonderful way to begin digging yourself out of the hole. Starter credit cards often have very high interest rates and punitive fee structures, whereas secure credit cards offer terms that match the very best lines of credit.

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Prepaid Credit Cards: A Secure Alternative For Consumers With Bad Credit

admin — Thu, 10 Sep 2009 12:54:19 +0000

With the recession and recent credit squeeze, many consumers are finding it harder to apply for a credit card. Many are finding that with their current credit scores, they are getting rejected because of bad credit. You might think “So, what. I don’t need a credit card.”

Unfortunately, a major credit card is needed to make reservations for hotels, car rentals and airline flights. You also need a credit card to place an order online or over the phone. So, how is a person with bad credit supposed to survive?

As you will see below, prepaid credit cards (also called secured credit cards) are a good way for a person with bad credit, or no credit, to have access to the benefits of a credit card. Let’s take a look at prepaid credit cards, how they work and how they can benefit the consumer with bad credit.

What Is A Prepaid Credit Card?

You open a secured credit card account by depositing money into an account much as you would a savings or checking account. Once the money is safely in the account, the credit card issuer issues you a credit card with a limit equal to that of the amount that you deposited. You use the credit card just like a regular credit card.

You can use the prepaid credit card up to the limit of the deposit. You cannot spend anymore unless you pay off the credit card or make another deposit. You can always have the company pay the balance with the funds on deposit as well. In theory, a prepaid credit card works the same way as prepaid debit cards linked to your checking account.

Downside To Using Prepaid Cards

Although pre paid credit cards are generally a good idea for those with bad credit, there are some fees involved in opening the account.

Fees And Charges. You will have to pay a fee of $5 to $10 to open the account. Also, you will be charged a fee every time you make a deposit onto the credit card. But for those with bad credit or who are unable to manage their finances, the benefits far outweigh the fees charged to use the card.

No Ability To Pay For Subscriptions. If you are planning to use the prepaid credit card to purchase a subscription or monthly internet service, it might not be possible. Many service providers do not accept a prepaid credit card because of the possibility that the account will be empty when the bill comes due.

Prepaid Credit Cards Are Good Alternative For Bad Credit

If you are suffering from bad credit and have gotten rejected when you apply for a credit card, a prepaid credit card may be a good alternative. You have all of the advantages of a regular credit card without the danger of spiraling deeper into debt. Be careful of the fees and understand that your prepaid card may be useful for recurring services. All in all, the prepaid credit card serves as a useful alternative to those needing a prepaid Mastercard or prepaid Visa card.

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