We all make mistakes in life, some more serious than others. One
of the biggest mistakes one can make is to mess up one's credit.
Credit is an integral part of modern society and it impacts just
about all aspects of one's personal and professional life (these
days, even employers routinely check the credit histories of prospective
employees; people with bad or terrible credit scores are deemed
"irresponsible" or "unreliable" to most human
resource managers.) When your credit rating is OK, the possibilities
and opportunities of life can seem limitless. But when your credit
rating is bad, life can be quite stressful, even depressing, especially
because in today's society, one cannot function normally without
having at least one credit card.
So what to do when your credit is totally messed up? The only real
solution is to rebuild your credit, and one of the best ways to
rebuild your credit is by getting one or more Secured Credit Cards.
What Are Secured Credit Cards?
Secured credit cards are very similar to standard credit cards
except for one significant difference: secured credit cards are
"secured" by you depositing money into a savings account
setup by the secured credit card provider. The amount of money you
deposit into this savings account will determine your credit line;
generally speaking, your credit line will be fifty to one hundred
percent (50% to 100%) of the total amount you have deposited in
your secured saving account. You can use a secured credit card to
buy all the goods and services you want and need in life, and in
doing so, over time, as you pay at least your minimum amount due
every month and keep your account in good standing, you can rebuild
or establish a desirable credit history.
Secured credit cards are great for:
- Young folks / students who generally need to establish
and build a credit history.
- Consumers who have had some debt or credit problems
in the past and who are looking for ways to rebuild their
- Consumers who have had major credit and debt problems
in the past, and who are looking for ways to start all
What Are The Disadvantages Associated
Because secured credit cards are "secured" by a savings
account, they are relatively easy to get when compared to regular
credit cards, but there are some disadvantages and potential negatives
that you should consider, including:
with Secured Credit Cards?
- High Fees: Secured credit
cards often have very high fees associated with them when compared
credit cards. The annual fee, late fee, over limit fee,
late payment fee and other fees that many people consider irksome
with standard credit cards can seem downright oppressive with
secured credit cards.
- Can Hold You Back: The
credit bureaus, banks, and other lending institutions know well
the difference between a regular credit card and a secured credit
card, and if you hold onto a secured card for too long, you
are often judged to be "not ready" for a standard
credit cards. This can hold you back as a consumer of credit,
so hanging onto a secured credit card for many years is not
a good idea.
- Interest Charges: The
charges on outstanding balances are invariably higher with
secured credit cards. The companies that offer secured credit
cards charge higher interest simply because they can. Therefore,
as is the case with regular credit cards, you should make an
effort to pay your entire balance in full every time you receive
your secured credit card statement; this kind of payment discipline
can end up saving you a lot of money in the long term.
- Secured Credit Card Scams:
Because many people who have poor credit are often vulnerable,
many unscrupulous "companies" out there try to take
advantage of the "sub-prime" market for credit by
tricking people into signing up for scam secured credit offers.
These rip-off artists often use language like, "EVERYBODY
CAN QUALIFY," or "YOUR CREDIT DOESN'T MATTER TO US,"
etc. Be careful. Be selective. Do at least some research on
the secured credit card companies you are interested in. There
are many secured credit cards offers to choose from so take
the time to shop
around and get the best possible deal you can.
To conclude, secured credit cards offer an excellent way
to rebuild anything from a slightly damaged to nearly ruined credit
history, but because they are secured and often have high interest
rates associated with them, it is wise to cancel any and all secured
credit card accounts you have once your credit has been repaired.