Secured Credit Cards- Consumer Tips

Whether you have no credit or damaged credit, secured credit cards are a good tool for building a good credit history.

Several months ago Tom, a member of CreditBoards.com, filed for a Chapter 7 Bankruptcy. Now he is in the process of rebuilding his credit history. It’s a task that is not easy, but with patient persistence he is seeing progress already. Daily he checks his credit score and is slowly seeing improvement.

1 – In addition to correcting every mistake, even the smallest ones, on his credit report, he is using a secured credit card.

2 – This secured card is an important tool in the overall process of building or rebuilding credit.

Who should consider a secured credit card?

Someone who has no credit history.

Someone with a damaged credit history.

What is a secured credit card?

Secured cards are credit cards opened with a deposit into a savings account, money market or certificate of deposit. The amount of deposit required varies from card to card, but generally minimum amounts range from $250 – $500. These funds are considered your security and will even earn a little interest since they are being held in a savings account. Your credit limit is determined by the amount you deposit into the savings account. Sometimes the limit will be for the full amount of the deposit; other times it will be a percentage of the total.

It is important to keep in mind that a secured card is a credit card, not a debit card. If full payments are not made each month, then interest is charged on the outstanding balance. And the lending institution uses the security money to pay off the debt only as a last resort. Even though the card is secured, it is still possible to damage credit.

What are the benefits of a secured credit card?

Establishing credit. If you have never had a credit card, a good first step in establishing good credit is applying for a secured credit card. Assistant Professor of Economics at Austin Peay State University in Clarksville, TN, Jerry Plummer says, “A secured card is most useful for the person starting out on their credit history, since it says that the person is willing to take the extra step to establish credit.”

Reestablishing credit. If your credit history is damaged, you may only be able to qualify for a secured credit card. Using this secured card appropriately and within the set parameters will help rebuild your credit and qualify you for an unsecured card. If you have had to file for bankruptcy, however, you may not qualify until it has been discharged.

Preset limit cannot be exceeded. If poor spending habits were part of the cause for bad credit, then a secured credit card will help keep spending in check.

Useful for transactions that require a credit card. Hotels and car rentals require the use of a credit card. If you don’t qualify for an unsecured card but you do for a secured card, then you are still able to make the transaction.

What should I look for or avoid when shopping for a secured credit card?

Fees. This is the area you will really want to research when shopping for a secured credit card. Some cards will come with fees that run into the hundreds of dollars, eating away much of the credit you secured with the savings account. Professor Plummer says a card with no fee is the best, but a small one-time fee can be okay. Annual fees for attractive secured cards typically range from $20-$35. Be sure to watch out for hidden fees such as “registration charges” and “setup fees.”

Interest Rate. Just because you have no or poor credit doesn’t mean you have to settle for the highest interest rate. Interest rates for attractive secured cards should not exceed 19%. Shop around and get the most competitive rate available.

Read the fine print. Linda Tucker, Director of Education for Consumer Credit Counseling Service for Arkansas and Memphis, TN, stresses the importance of reading the fine print. Doing so will let you know your exact obligations to the issuing company: for example, the grace period, what happens if you don’t make a full payment, and what fees are attached if you don’t make the full payment. Understanding these details will help make sure you are not further damaging your credit.

Fraudulent Offers. As with unsecured cards you need to watch out for fraudulent offers.The Federal Trade Commission gives the following advice to protect yourself from credit card fraud:

Offers of easy credit. No one can guarantee to get you credit. Before deciding whether to give you a credit card, legitimate credit providers examine your credit report.
A call to a ‘900’ number for a credit card. You pay for calls with a ‘900’ prefix — and you may never receive a credit card.
Credit cards offered by “credit repair” companies or “credit clinics.” These businesses also may offer to clean up your credit history for a fee. However, you can correct genuine mistakes or outdated information yourself by contacting credit bureaus directly. Remember that only time and good credit habits will restore your credit worthiness.

When will I qualify for an unsecured credit card?

It can take several months to see an improvement in your credit history. Bankrate says it’s a good indicator when you start receiving flyers in the mail for unsecured cards that your credit is improving. However, it’s a good idea to continue taking things slowly. Using a secured card will help you learn healthy habits so that when you do get an unsecured credit card you remain in control of your spending and credit.

Where can I find a secured credit card?

Most companies don’t advertise secured cards. But you can visit the Card Reports section of http://www.CardRatings.com to find out where and how to apply. Click on the link entitled “Cards for Consumers with Poor or No Credit”.

Other tips

Tom recommends sticking with only one or two cards and keeping spending to a minimum. The goal is to pay the card off each month.

Tucker emphasizes the importance of paying the amount due each month; otherwise late fees can be charged, interest rates raised, privileges lost, and credit history negatively affected.

Make sure you are getting a credit card as opposed to a gas card or a department store card.

Make sure a reputable bank or credit union, even a local one, is issuing the card. And, don’t automatically assume a bank is issuing the card.

Not all issuers report to the three major credit agencies (Experian, Equifax, and TransUnion). It’s important to get a card that does report to all three agencies; otherwise you will be wasting your time. Fortunately, secured cards normally report to the credit agencies just like unsecured cards (you should verify this before applying).

If you have filed for bankruptcy, you may need to wait until it has been discharged before qualifying for a secured card.

Get one only if you cannot get credit, since you have no credit record; or if you have poor credit. Plummer says, “Many companies will not even count them as credit, such as automobile F&I (Finance and Insurance) people, although they will not admit it.” So, if you don’t really need a secured card, you will be doing more harm than good.

Finally, whatever situation you are in, no credit or poor credit, the best way to build good credit is to set up a budget and then stick with it.

1 You can pay membership fees to any one of the three credit bureaus – Experian, TransUnion, and Equifax- to be able to check your credit score online daily. Visit our Credit Information section for more details. Tom recommends purchasing Microsoft Money 2004, which comes with a one-year membership to Experian (value of $99.00).

2 To find out more about correcting errors on your credit report, read our article How to Correct Mixed or Split Credit Reports.

How To Deal With Credit Cards – A Definitive Guideline

Various types of credit cards are available in the market. They have evolved from their early days into flexible financial tools for most types of spenders and savers. But with so many types of credit cards on offer it can be somewhat overwhelming. Few examples are Airline credit card, Balance transfer credit card, cash rebate credit cards etc.

How to choose the Right Card?
There are literally tens of hundreds of credit cards on offer in the USA, and the list is growing daily. So, which is the best on offer? It very much depends on how each person plans to use their card. The answer lies in asking one simple question; “What do I want to use a credit card for?”
Applying For Credit Cards Online
This option is simple and most convenient. More and more people are applying for credit cards online. Along with online auctions, and shopping, signing up for credit cards, loans and insurance has been one of the fastest growing commercial activities on the net.
How to decide which credit card is suitable for me?
First decide what YOU are looking for then search the web. There are some bigname credit cards that might charge the earth for you to have the privilege of carrying their name in your wallet. Most of them are not worth the extra fees. But what makes a card worth its salt? And what steps should you take in choosing the right card?
Rate Tart Are You One?
Rate tarts are the smart shoppers of the credit card world. They play the system to avoid paying interest on purchases, borrow money for free, and even make money on that borrowed money! The idea is simple. DO NOT leave any balance in your credit card and pay in FULL before the next billing cycle.
Quick Balance Transfer
Balance transfers allow card holders to transfer the money they owe to their existing credit card to another, usually at a special rate of interest. The new credit card company pays off the old credit card debt and transfers it to the new card.
0% Balance Transfers What’s The Buzz?
Balance transfers can be a good way of managing large sums of debt. The idea is simple. You have a large debt, loan, store card balance or credit card balance
Cash Back Credit Card
It seems almost too good to be true; a credit card company giving back money to the user just for spending it in the first place! However, as with all good deals, there are terms and conditions.
The Value Of Having Branded USA Credit Card Loyalty Programs
Anyone who has taken even the briefest of looks at the USA credit card industry will immediately notice that there are well over a thousand credit card providers. However, even in this hugely competitive industry, there are still only two main types of card available – the Visa card and the MasterCard.
Secured or PrePaid Credit Cards
So you need a credit card for emergencies, peace of mind, or for your teenage child but aren’t willing to go into debt for it? The answer might just be a secured or prepaid credit card.
Airmile Credit Cards
These days most major USA credit card providers offer a vast array of reward programs to try and entice potential new customers to apply for a card. Since the inception of reward packages, one of the most popular packages that applicants go for is airmile credit cards.
Business Credit Cards
If you are either the owner or Chief Financial Officer (CFO) of a business and do not have business credit cards, then the following 10 reasons might make you want to rethink your business credit card strategy.
How To Manage Your Store Card
Many major outlets offer store cards. These provide an easy way for consumers to defer payment for purchases. Store cards are promoted over public address systems in shops and by shop assistants at checkouts. So it’s no surprise that there are millions of store cards accounts in the USA.
Identity Theft
Identity theft is a major issue in the USA, and with good reason. It has been estimated that it can take up to sixty hours of work to recover a stolen identity, and in the worst cases, cost up to thousands of dollars to put right. But what can be dome to prevent this?
Payment Protection Cover For Your Credit Card Is It Worth The Cost?
Payment protection cover states quite clearly what it is but what are the ins and outs of the policy and its worth considering taking out payment protection cover on your credit card.
Credit Card Charges
Credit cards appear to have only one cost to a user – the interest charged on purchases, but there are a whole raft of hidden charges just lurking below the surface. So, some cards offer an annual payment option in return for certain benefits. What is the best option, and in what circumstance
Smashing The Credit Rating Myths
It used to be said that there were two certainties in life – death and taxes. Today you can add a third – credit. Today, it is almost certain that at some point during your life you are going to need to apply for credit. This credit may be either be in the form of a credit card, charge card, hire purchase, personal loan, home loan, etc.
Credit Building Tactics
Much is written about credit ratings, the score against an individual’s name, that rates their eligibility for credit.
Credit Reports
Every time a customer applies for a financial product such as a credit card, the credit company will consult that customer’s credit file. This file records all their financial activity in terms of credit applications and banking activity.
Credit Card Options For People With Bad Credit
There are many items that you can only pay for with a credit card. If you want to book a holiday on the Internet, a credit card is a secure way to pay. And if you want to hire a car when you get to your destination or booking a hotel room, a credit card is your only option.
Do You Need To Have More Than One Credit Card?
Deciding whether or not to have more than 1 USA credit card can be a difficult decision to make. On the one hand, you want to keep a careful control on your personal finances and having numerous creditors makes this difficult. On the other hand, it can be convenient to have more than one credit card, for example in an emergency. So, you should have more than 1 credit card.
Credit Card Disadvantages
Credit cards are everywhere; figures show that the average card user has over 4 credit cards in their wallet, and there are more cards always in circulation!
Common Credit Card Mistakes
With credit cards now outnumbering people in the USA you would be right to assume that not everyone in this country uses their credit cards either correctly or wisely. But what are the most common mistakes that credit card holders make when using their credit cards?
Are PreApproved USA Credit Cards A Scam?
Appropriately know as junk mail, every now and then you may find a nice glossy letter on your doormat informing you that you have just been ‘preapproved’ a USA credit card. With your pulse racing, you start to believe then hype of what a wonderful customer you are and how much your custom is valued. Hold on tiger – you may well be falling for one of the biggest credit card scams going!
Visa or Mastercard?
The two main credit card types have battled it out since the mid 1960s, but the credit card revolution was started in earnest by American Express, in 1958. Soon, their card was the choice to pay at hotels, airlines and restaurants.

What You Need To Know About Credit Cards

What is a credit card? A credit card is a card that allows you to borrow money to pay for things. There will be a limit to how much you can spend called your credit limit. At the end of each month you can either pay off the whole of the amount you owe or make a minimum repayment. Other kinds of cards include: 1) A cheque guarantee card, issued by your bank, that you can use to ensure that your cheque will be honoured up to a certain limit.

2) A chargecard where you have to repay the full amount at the end of each month.

3) A debit card, issued by your bank, where whatever you spend is immediately deducted from your bank account Do you need a credit card? Using a credit card is a useful way of making purchases: a) A credit card means you don’t need to carry huge amounts of cash around and risk losing it.

b) A credit card means you can buy items over the internet.

c) A credit card means you can make purchases abroad without having to worry about local currency.

d) A credit card gives the opportunity to spread the cost of a large payment over several months.

e) A credit card is useful in an emergency. For example, an unexpected repair to your house or car.How do you choose a credit card? The main two UK credit card issuers are Visa and Mastercard. These are accepted in most places and in 130 countries worldwide. Beware of less well known brands that may not be accepted everywhere. Before you choose which credit card is the best for you, remember to read the terms and conditions carefully. Never sign up for a credit card without fully understanding what you are agreeing to. Remember that all the plus factors will be prominently displayed in large print. You may have to study the small print carefully to discover if there are any negative factors.
A list of the current cards on offer in summary is available on this credit card summary page. What You Need To Consider:1) APR (Annual Percentage Rate)

This is the rate of interest that you will pay on any outstanding balance. 2) Special Introductory Rates

You may be offered a low or 0% rate of interest for a limited time (Up to 6 months) when you sign up for a new card. A higher rate of interest may be charged for cash withdrawals. 3) Balance Transfer Rate

Card issuers may offer you a lower rate of interest if your swap your balance from another credit card to theirs. 4) Interest Free period

Remember to check when interest payments will begin. Will you pay interest from the day of the purchase? Or will you have a number of days interest free before you begin to pay? There is usually no interest free period for cash withdrawals. 5) Cashback and Rewards

Some cards over points or rewards for every pound spent on the credit card. Make sure that these are appropriate for you. For example, there&’s no use collecting airmiles if you never fly. 6) Minimum Repayment

Remember to check what the minimum monthly repayment will be. If you borrow £1000 on your credit card the monthly minimum repayment will probably be in the region of £25. But if you only pay this amount each month it will take a long time to pay off the balance and cost a lot in total when you include the interest payments. 7) Annual Fees

This is the fee that the issuer will charge you every year for using their credit card. Not all credit cards have an annual fee, so remember to consider this when you are choosing which one is right for you. 8) Late Payments

There will be an extra charge, as well as the interest owed, if your payment is late. This charge may even be more than the amount you owe so be very careful to check what the charge is, and to ensure that all your payments are made on time. A good way of doing this is to set up a direct debit from your current account. 9) Exceeding Your Limit

You may also be charged a fee if you exceed your credit limit. Will Your Application Be Accepted? Whether or not your application is successful will depend on your credit rating. Your credit rating depends on your credit history (a record of your use of credit) and is based on the record of your ability to repay debt. You can obtain a copy of your credit file by contacting a credit reference agency. There may be a small fee for this service. When you application has been accepted you will be given a credit limit. The credit limit will be fixed when you first apply for your card (although you can ask for it to be increased or decreased later) and the limit, including the amount you have left available to spend, will be shown on your monthly statement. Insurances and Protection. What You Can Do: 1) Take good care of your credit card to ensure that it isn’t lost or stolen. 2) To prevent misuse of your card you must report any loss or theft of your card to the issuer immediately. Many issuers allow you to register all your cards with them so that in the event of you losing a purse, handbag or wallet they can all be cancelled with just one phone call. 3) You must keep all your receipts and also check your statement carefully and report any suspicious transactions. For example payments that you have no record of making. 4) Credit card companies are now issuing cards with PIN (Personal identification numbers) which are known as Chip and PIN cards. Rather than signing your name you will be asked to enter your PIN onto a keypad. You must ensure that you keep this number secret. What The Issuer Will Do 1) The issuer should insure you against loss, misuse or theft of your card. 2) The issuer may also insure your purchases for up to 100 days. 3) Your issuer may also provide protection against you being sold unsuitable or shoddy goods. Important Points To Remember:a) Credit cards can be a very useful tool to help you to manage your finances.

b) Choose your card carefully, remembering to read and understand all the terms and conditions before you sign up.

c) Remember to set yourself a budget and decide how much you will pay off each month.

d) Check your statements carefully each month.

e) Look after your card to prevent it being lost or stolen.For a glossary of the terms mentioned in this article please visit the credit card glossary page.