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Secured Credit Card Guide
A secured credit card is a credit card where the cardholder has offered some type of security, usually in the form a savings deposit, to ensure that payment of the outstanding balance will be covered should the cardholder default on later monthly payments. Secured credit cards can be used to pay for goods and services just as a normal credit card can be
- things like petrol, take away meals, books and subscriptions. However, a secured credit card requires you to open and maintain a savings account as security for your line of credit; an unsecured credit card does not.
The required savings deposit for a secured credit card may range from a few hundred to several thousand dollars depending on the financial institution that you apply for your card through. Similarly, the credit line that you are offered through your financial institution is usually a percentage of your deposit - between 50 and 100%. For example if you pay a deposit of $1000, you may be offered a line of credit somewhere between 50-100% of this amount as secured credit.
Generally, with these cards you might have to pay application and processing fees so before you apply, ensure that you are aware of what the total fees will be and whether they will be refunded if you application for a card is declined. Similarly, a secured card requires an annual fee usually somewhere in the order of $55 per year, and attracts a higher interest rate than an unsecured card which are typically around 15-18%.
Secured credit cards allow consumers with less than perfect credit, a low or non existent credit rating or someone who is self employed, to establish or re-establish their credit line while at the same time enjoying the benefits of owning a major credit card. This is particularly useful considering that so many transactions, can now be completed over the phone or internet and require use of a valid credit card.
