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Like it or not, in today’s society you need at
least one
credit card. Being approved for one typically
is not a problem for those who have an
established, clean
credit history. But what about everybody else?
For them, applying for a
secured credit card is the answer. A secured
credit looks just like any other major credit
card, but there’s one main difference.
In order to be approved for a secured credit card,
you will have to set money aside. This money is a
deposit that acts as collateral. The amount of
money you’ll need to deposit will depend on the
particulars of the secured credit card you select.
Generally the amount ranges from a few hundred
dollars to $500. Whatever amount you are required
to set aside will also be your
credit limit.
Who needs a secured credit card? There are 2 main
groups who benefit from such a credit card: those
who have not yet had an opportunity to establish a
credit history and those who are trying to
reestablish good credit. Remember, a secured
credit card works just like a regular credit card.
It can be used to make purchases online and in
retail stores. It can be used to reserve airline
tickets and car rentals. And once it’s used, the
card holder will have to make timely payment.
When you use a secured credit card, your payment
history is reported to the
credit bureau just as if you were using a
regular credit card. This means that you're
establishing a credit history which can eventually
lead to your being able to qualify for unsecured
credit cards, mortgages and bank loans once
you've proven your ability to pay.
When it comes to applying for a secured credit
card, you've got plenty of choices. Most major
banks offer their own branded
VISA and
MasterCard
secured credit cards, but they are not all
created equal. Here are some things to look for
when you're reading the fine print on the secured
credit card application:
1. Annual Percentage Rate (APR). The lower the
rate the less interest you'll pay.
2. Grace Period. That's the amount of time you
have to pay your current charges in full without
incurring an interest charge. The more days, the
better.
3. Annual Fee. That's the amount you pay the
credit card issuer for the privilege of carrying
their secured credit card. The lower, the better.
Zero is best!.
OK, you're all set. Go ahead and get your secured
credit card and start building your credit.
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