Why Secured Credit Cards Are Better Than You Think


NEW YORK – March 10, 2022 – (Newswire.com)

iQuanti: Are you having trouble qualifying for a regular credit card? If you’ve had credit issues in the past and need to build or rebuild your credit score, you might want to try a secured credit card.

Understanding Secured Credit Cards

wondering what is a secured credit card? A secured credit card is a special type of credit card that requires an initial deposit. It will have the same look and feel as a regular credit card. The only difference is that you will have to hand over a small amount of money (usually a few hundred dollars) before you can start using it.

This initial deposit is intended to serve as a guarantee for the card issuer. If you are unable to pay your bill and are in default, the card issuer will take your deposit to settle the balance due. This should be avoided as it will negatively affect your credit score.

What are the advantages of a secured credit card?

Secured credit cards are quite common and can offer many advantages:

  • Approval is easier. Because you provide collateral, lenders don’t have to rely as much on your creditworthiness.
  • A chance to improve your credit score. Since a secured credit card is still a line of credit, your payment activity will be reported to all three major credit bureaus. If you use this as an opportunity to practice good habits, your credit score will benefit.
  • No charges. Many of the major financial institutions offering secure credit cards do not charge account holders any fees.
  • Earn rewards. Just like a regular credit card, secured cards can offer rewards. These are usually points that can usually be redeemed for gift cards or cash back.
  • Refundable deposits. As long as you make your payments and don’t default, you’ll get your deposit back once you no longer need the card.

Of course, there are compromises to using a secured credit card. Besides the requirement to make the initial deposit, users will usually have to work with a lower credit limit and accept higher than normal interest rates. Also, there is no guarantee that you will be able to switch to an unsecured card later.

Highly Effective Credit Card Habits

No matter what type of credit card you use, good habits are essential to your success. Here are some tips to stay on track:

  • Always pay on time and in full. A strong payment history is the cornerstone of using credit and accounts for 35% of your FICO score. An easy way to do this is to set up the autopay feature so you never miss a payment.
  • The lower you can keep your balance, the easier it will be to manage. In fact, keeping your spending below 30% of your available credit line will help improve your credit score. Start by using your card for one or two regular, recurring expenses like a cell phone bill or gas for your car.
  • Avoid credit card interest. Paying off debt can be difficult while you’re actively earning interest. The only way to avoid this is to never have a revolving balance. Again, keep your expenses to a minimum and do everything in your power to pay your balance in full each month.
  • Keep your card open as long as possible. The longer you have a card with a good history, the better it will be for your credit score. 15% of your FICO score is related to the age of your accounts. If there is no charge, what’s the harm? Note that if you upgrade your secured credit card to an unsecured credit card, it will likely retain the same credit history and account age.

The more you can make these habits part of your routine, the better financial opportunities you will have to look forward to.

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Why Secured Credit Cards Are Better Than You Think

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