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Secured Credit Cards

Secured Credit Cards
Over the years it so happens that due to late payment on the credit cards or by missing one or more installments, credit rating is ruined. There may be many reasons for such a behavior. But the ultimate result is that just because your credit history is not good, in fact it is very poor, you are unable to get a credit card. Once you apply for a credit card, financial institutions do a check on the credit history before accepting the application. Your poor credit history proves to be a hurdle in your future activities.

But there are financial institutions that have credit cards for people with a poor credit history. Rather most of the top notch financial institutions have credit card category for people with poor credit history. One of such cards is a secured credit card. People who have bad credit history can apply for secured credit cards.

The reason that secured credit cards are issued to people with bad credit history is because a fixed amount of money is deposited in a savings account as collateral against the credit card. This amount of money is the limit of your card. Financial institutions offer secured credit cards to people with bad credit history because their risk is lowered due to the presence of collateral money. This money can be used for the recovery of installments if the credit card holder fails to pay the installment.

So bad credit history people can still have a credit card but they have to secure it. Financial institutions normally charge higher rate of interest on secured credit cards because of the people with bad credit history.

Unsecured credit cards are those that do not require depositing collateral money. Unsecured credit cards have lower rate of interest as compared to secured credit cards because it is issued to people who normally have good credit history. It is easy to apply for an unsecured credit card for people who have a good credit history. Financial institutions feel confident in advancing credit cards to people who have such a behavior in the past because this show their tendency and habit of making payments in time. So these institutions do not fear default in their case. They confidently issue unsecured credit cards to people with a sound credit history.

It is often difficult for bad credit history people to obtain an unsecured credit card, they might get it but that is only if they are lucky.

So while choosing between a secured credit card and an unsecured credit card it is necessary to consider your own credit history. Once you have obtained a secured credit card, it is advisable that you try to improve on your credit history. This is the best time to make improvements. Try to make payments on time. Try not to delay payment or skip any as this will only add to your disadvantage. Mostly people pay the minimum amount due on their credit card. They are not aware that they will have to pay for it in the end because financial institutions charge interest on the remaining amount. What can be done and should be done is that they should pay the complete outstanding balance. The key to effective use of a credit card is that you should make the payment as soon as you have made the purchases with a credit card. Another important thing that should be kept in mind is that you should not use more than thirty percent of your credit limit because financial institutions not only consider your payment behavior but also the percentage of the amount extended to you. If you are using maximum of your credit limit on the card, even if you make the payment on time, it would lower your credit rating.

In this manner once your credit history improves, you can apply for an unsecured credit card.

Secured Credit Cards