Due to the many different types of cards available to consumers, finding the best credit card for your spending needs can be challenging. As a general rule, people who have a high credit score and good credit history qualify for credit cards that offer the most favorable terms and conditions. So where does that leave individuals who have no credit history or those trying to repair damaged credit? With fewer choices most consumers turn to secured credit cards to establish or re-establish credit.
The Difference Between Secured and Unsecured Credit Cards
The basic difference between the two cards is the source of funds available for purchases. An unsecured credit card allows consumers to make purchases and repay the balance without the need for collateral. Secured credit cards require a cash deposit from the card holder that is used as collateral for the line of credit on that account. In time and with responsible use many secured cards will increase the credit limit available without requesting an additional deposit.
What To Look For When Shopping For A Secured Credit Card
- Fees- Secured credit cards come with their own set of fees that differ from unsecured credit cards. Many charge application fees, activation fees, annual fees, program and monthly service fees. For this reason it is important that you read the fine print before applying for a secured card or making your deposit. Consumers who do not take the time to shop around or understand the terms are often surprised when their deposit is greatly reduced by various fees leaving them little available credit for purchases.
- Interest Rates- Finding a card that offers a low interest rate is not just a priority for those with good credit. Admittedly individuals who are using secured credit cards to rebuild or establish credit are less likely to get very low interest rates, that should not discourage you from shopping around. Interest rates will vary with card offers and it pays to take the time to find the best interest rate available.
- Reports Activity To Credit Bureaus- Many consumers are under the false impression that all credit cards report activity to the three major credit bureaus. This is not always the case. Since most people who use secured cards are trying to rebuild or establish a good credit history having a card that does not report information defeats the purpose of using that card.
Where Do You Find The Best Secured Credit Card Offers
A simple Internet search will yield dozens of credit card offers. This is by far one of the easiest and most convenient ways to compare offers side by side to see which card is best for you. Consumers that belong to a credit union can also inquire about secured credit cards. Credit unions often offer lower interest rates and may waive annual fees.