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A secured credit card looks identical to an unsecured credit
card and usually offers the same security and charging
privileges. The difference is that with a secured credit card
you have to pay the credit card company a deposit of security
that amounts to the same amount as your credit line. This
assures the company that they will get their money back if you
turn out to be a bad credit risk.
Secured credit cards work more or less like bank debit cards,
except the money spent is not withdrawn immediately and the user
makes payments monthly. They're also similar to 'prepaid' credit
cards, in that money must be outlaid first. With prepaid cards,
however, the cards are 'loaded' with any amount desired. Also,
there are fees extracted every time the funds are input.
Some credit card companies may be willing to give you a limit
that is a little above your security deposit. Others will only
offer a limit that is lower than your security deposit. If you
are considering a secured credit card, shop around to find out
what your options are. A secured credit card can be right for
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* if your credit history is poor.
* if you have delinquent student loans.
* if you are separated from your spouse who has a high debt
ratio.
* if you have declared bankruptcy.
* if you've had a disruption in your employment or have recently
started a new job.
A secured credit card does the following:
* Helps you to establish credit if you do not have a credit
history.
* Helps you re-establish your credit if you have bad credit or
have had to declare bankruptcy.
* Offers security in times of emergency.
* Gives you many of the same benefits as an unsecured credit
card.
Disadvantages
* You have to make a security deposit, usually equal or more
than your credit limit.
* The funds you deposit are frozen until such time as your
credit history is re-established.
* You may not be reimbursed for the interest on your security
deposit.
Of course, there's no free lunch associated with obtaining and
using a secured card. Since the applicant is considered high
risk, a higher APR is charged. That makes making monthly
payments harder, which is usually what generated bad credit
history originally.
To work around the dilemma, users should be sure, (for the first
year, at least), to keep charged amounts low and make efforts to
pay off almost all the amount due when the bill arrives. Notice
'almost all' because one of the most effective ways to build
good credit history is to make payments on time and pay some
interest. That raises your credit score quickly. If you use your
secured credit card wisely, soon you'll be on the path to a good
credit history.
Orchard Bank Secured MasterCard®
- Reports to all 3 credit bureaus monthly, which can help improve your credit score
- Free Online 24-hour Account Access and Bill Pay
- Complete your application, including your security deposit, online
- Set your own credit limit
Apply Now!
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