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conquering credit & credit cards

unsecured vs. secured credit cards

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Secured credit cards, sometimes called “second chance cards,” are a great option for those who have no credit or bad credit, but want to get a credit card to start building or improving their credit.

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So, you use credit cards to build your credit, but you need decent credit to get a credit card in the first place. But, what if you don’t have good credit? Feels like a catch-22, right? That’s what secured credit cards are for.

If you don’t have great credit, that’s nothing to be ashamed of. You can always build it back up! That’s why secured credit cards exist.

 

What is a secured credit card?

  • A secured credit credit card is typically reserved for those with poor (or zero) credit history or who want to do a better job of budgeting. The term “secured” in this sense means that you’re essentially funding the card yourself by imposing a limit on it. These cards can be easier to get than most others because you don’t need to have a great credit score.
  • With secured cards, you put down a deposit, and then that deposit becomes your credit limit. For example, you could put down a deposit of $500 and that then becomes your credit limit, meaning you aren’t able to spend more than $500 against that card each month. It exists this way so that the credit card company can essentially cover themselves. If you aren’t able to pay the balance off, they already have money from you to be able to pay it off using the deposit.
  • As with other cards, if you continue to pay off your balance, your credit will go up over time and you’ll be able to keep on building it. Once you get to a good point, you can move from a secured credit card to an unsecured card (if you want).

 

What’s an unsecured credit card?

  • An unsecured card is the more common type of credit card – it doesn’t require a deposit, and you get one based on your past credit. But, the card will almost always have a credit limit imposed by the lender, which then becomes your monthly limit and will change based on your ability to pay off your bill.
  • NOTE: Don’t confuse deposit and annual fee. The deposit is specific to a secured card, but an unsecured card may still have an annual fee, which is an amount of money you pay just to be able to use the card. Not all cards have annual fees.

Overall, there are benefits of both secured and unsecured cards. But it may come down to what you need it for. If you’re digging yourself out of a credit hole, a secured card is a great direction for you – that’s why they’re sometimes called “second chance cards.”

But, if you already have good credit, it’ll be easier to raise your credit limit and improve your score if you go the unsecured route.

 

Source(s): Discover

No account yet? Register

conquering credit & credit cards

unsecured vs. secured credit cards

Secured credit cards, sometimes called “second chance cards,” are a great option for those who have no credit or bad credit, but want to get a credit card to start building or improving their credit.

So, you use credit cards to build your credit, but you need decent credit to get a credit card in the first place. But, what if you don’t have good credit? Feels like a catch-22, right? That’s what secured credit cards are for.

If you don’t have great credit, that’s nothing to be ashamed of. You can always build it back up! That’s why secured credit cards exist.

 

What is a secured credit card?

  • A secured credit credit card is typically reserved for those with poor (or zero) credit history or who want to do a better job of budgeting. The term “secured” in this sense means that you’re essentially funding the card yourself by imposing a limit on it. These cards can be easier to get than most others because you don’t need to have a great credit score.
  • With secured cards, you put down a deposit, and then that deposit becomes your credit limit. For example, you could put down a deposit of $500 and that then becomes your credit limit, meaning you aren’t able to spend more than $500 against that card each month. It exists this way so that the credit card company can essentially cover themselves. If you aren’t able to pay the balance off, they already have money from you to be able to pay it off using the deposit.
  • As with other cards, if you continue to pay off your balance, your credit will go up over time and you’ll be able to keep on building it. Once you get to a good point, you can move from a secured credit card to an unsecured card (if you want).

 

What’s an unsecured credit card?

  • An unsecured card is the more common type of credit card – it doesn’t require a deposit, and you get one based on your past credit. But, the card will almost always have a credit limit imposed by the lender, which then becomes your monthly limit and will change based on your ability to pay off your bill.
  • NOTE: Don’t confuse deposit and annual fee. The deposit is specific to a secured card, but an unsecured card may still have an annual fee, which is an amount of money you pay just to be able to use the card. Not all cards have annual fees.

Overall, there are benefits of both secured and unsecured cards. But it may come down to what you need it for. If you’re digging yourself out of a credit hole, a secured card is a great direction for you – that’s why they’re sometimes called “second chance cards.”

But, if you already have good credit, it’ll be easier to raise your credit limit and improve your score if you go the unsecured route.

 

Source(s): Discover

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