I have always considered a credit card to be a risky proposition. This is true especially for people who feel a great urge to buy things when they have a credit card with them. There are many people who have ended up buying things with a credit card that they otherwise would never have purchased. But what we are talking about are the negative aspects of owning a credit card. On the other hand, look at the convenience that it offers. Be sensible and use it, do not abuse it. The credit card can be a really great financial tool to possess. There are different types of credit cards.
Secured Credit Cards
Secured credit cards are the safer bet when it comes to owning a credit card. These credit cards require the applicant to deposit some money in a special savings account with the credit card company. Based on the amount deposited and on the income source and credit history of the applicant, the application is accepted or rejected. Secured credit cards have always been compared to debit cards. But these cards are different. In debit cards, the money is directly debited from the bank account. But in secured credit cards, it is a loan that you avail of based on the amount in the savings account. If you make the monthly payments regularly and on time, the money in your savings account is never touched. It is intact. Only if you default on payments, then the money is debited from the savings account. Secured credit cards are real credit cards. It can be a visa or a MasterCard.
Less risk involved
Credit card companies feel more secure when they deal with a secured credit card application. This is because, when the applicant is ready o deposit some amount of money, it creates an impression that he is serious about making the payments on time. Hence you will find that your application for a secured credit card has more chances of being accepted. These cards will also not cause a huge dent in your accredit scores. For those who do not know, a credit card is the easiest way for you to ruin your credit scores. So use a secured credit card and build up a good credit and payment history. It will help you when you apply for other credit cards or loans in the future.
Interest Rates
The interest rates for secured credit cards also vary according to the lender and the applicant. For example if an applicant is ready to deposit a large amount in the savings account, he may get a much lower interest rate. Some lenders have interest rates that start from as low as 9% and goes up to as high as 23% or more for secured credit cards. The annual fees also vary from $0 or $65 or more.
Minimum deposit
The minimum amount that you need to deposit also varies from one credit card Company to the other. Some companies have a minimum balance requirement of $300 while there are others who require a minimum balance of $500 or more. Whichever company you sign up for, ensure that you shop around a bit before you sign up for anyone of them.
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Secured Credit Cards Of the two types of credit cards, secured credit cards are always the better option. They are safer and can often control the urge that you have to spend unnecessarily.
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