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When
deciding upon what
credit card
is the best for you, don’t rule out secured credit cards.
In fact, many people are finding secured credit cards
to be the best option. Some people choose a secured credit card
when they have had credit problems in the past,
and obtaining a traditional credit card would be
difficult if not impossible. Secured credit cards
are great options for teaching your teenagers and
college students about responsible financial
spending. Secured credit cards help control your
spending, since you must have the money before you
can make a purchase, unlike a traditional credit
card that you don’t have to have the money to back
up your purchases.
So,
you may be asking why bother with a credit card at
all, if you have to have the cash available to
fund your secured credit card. In our modern
times, it is becoming increasingly difficult to do
certain things without having access to a credit
card. Have you ever tried renting a car or
purchasing an airplane ticket without a credit
card? Ever tried booking a hotel room without a
credit card?
Secured credit cards work in the same manner as a
checking account
debit card,
however, there is no actual checking or savings
account associated with the card. You make a
deposit to the company that issues the secured
credit card, and that becomes your spending limit.
When you have made purchases that reach the amount
of money you deposited, you have to deposit more
money in order to continue using the card.
Advantages of using a secured credit card, other
than the obvious advantage of not spending more
money than you actually have, include the fact
that almost anyone is eligible to obtain a secured
credit card. Regardless of your personal financial
history and
credit score,
you can make a deposit with a secured card
distributor and obtain a credit card. The only
actual requirement to be approved for a secured
card is you must be of legal age and have money to
deposit on the card.
Other advantages of a secured credit card versus a
traditional credit card are that you are not
charged an annual percentage rate on the amount
that you deposit, and you can have your paycheck
deposited directly onto a secured credit card in
many instances. A traditional credit card will
smother you with
interest rates,
late fees and finance charges
over time, and you’ll end up paying two to three
times what you’ve actually charged to the card!
With a secured card, you know exactly how much
you’re paying for an item. Secured cards allow you
to make purchases online when you would not be
able to if you didn’t have a traditional credit
card.
The
main disadvantage to using a secured credit card
in place of a traditional credit card is the fact
that you have to have the money in advance for any
purchase you want to make. While this is an
advantage when considering your credit score and
the perfect way to avoid getting into debt too
deep for you to handle, it is also a disadvantage
in the event of an emergency situation. If your
car breaks, or your home’s furnace dies and you
don’t have the cash available, a traditional
credit card would come in handy. Perhaps without
ever using traditional credit cards however, you
will be able to save enough money to cover
emergency instances and not need to rely on credit
to bail yourself out of the emergency situation.
Secured credit cards may be the best option for
your credit card needs. They allow you to travel
conveniently, make purchases by phone or the
internet, and without the dangers of falling into
financial desperation!
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