Low credit score or no credit score at all is a problem of many bank customers who would like to take a loan, or would like to have such an option in future. There is a way, though, to build or rebuild a credit score using secured credits cards. Secured card proves that the client is able to pay the loan back and therefore can be trusted. Using a secured credit card properly, one is able to build up the credit score and become eligible for bigger loans and unsecured cards.
HOW MUCH IS A TYPICAL DEPOSIT ON A SECURED CREDIT CARD?
When opening a deposit account, you must clearly understand why you are doing this. Raising money for vacation is one thing, whereas depositing all your money holdings is something totally different. The term of the deposit and other parameters depend on the purpose of your financial investment. However, if you want to get a secured credit card, the deposit depends on the sum you would like to borrow. The bigger it is, the more possibility that the deposit needed will be that matching the loan.
HOW TO USE YOUR SECURED CREDIT CARD WISELY
A credit card can be a useful tool for a person who has a sufficient level of financial literacy. If you do not understand how credit cards work, find below some of the nuances you should be aware of.
- Carefully study the conditions
- Clarify all the nuances of the grace period
- Withdraw cash from ATMs as little as possible
- Do not forget to close credit cards
- Use the credit card carefully and pay on time
All in all, credit cards are a wonderful alternative to other loans. The only important thing here is that one should know how to use the plastic wisely to avoid unnecessary expenses.
HOW TO GET A SECURED CARD
All credit cards differ in their use terms, service costs, attached bonus programs, etc. Therefore, when choosing a plastic, you need to pay attention to the following parameters:
- The interest rate – the “price” of the loan that you pay for using the bank’s money.
- Commissions and other changes – the cost of services for various operations done with the plastic.
- Credit limit – determine the maximum amount you want to borrow from the bank and do not exceed this limit.
- Grace period – a period of time (50-60 days) during which you can use bank’s money for free, making only the minimum payment.
After you have chosen the type of plastic and bank, make a deposit equal to the sum of the loan you want to take. After that, the bank will issue a secured credit plastic.
HOW TO IMPROVE TO AN UNSECURED CARD
Some of the parameters that indicate bank’s stability are the following ones:
- quality and quantity of bank assets;
- the reputation of the bank;
- investment share in paper holdings;
- money market rate.
if the bank is reliable, you can open a secured credit plastic there. This will create a high credit score, making you eligible for unsecured credit cards later.
SECURED CARD VS. UNSECURED CARD
A credit card is a convenient tool for receiving money and making non-cash payments. Secured plastic provides guarantee to the bank that the loan will be payed off in any case, and helps the customer to build a high credit score. Unsecured plastic, on the other hand, is issued only to those clients who are reliable from the banks’ point of view. These cards offer more bonuses to the customer, like air miles or free nights in hotels, and the credit limit is higher as well.