Important Questions to ask when Applying for a Secured Credit Card
If you have bad credit or no credit, it may be in your best interest to apply for a secured credit card. In fact, a secured credit card may be your only option for improving your credit. Because credit cards can play a huge role in our lifestyles, it only makes sense to have a credit card on which you can rely.
Secured credit cards, however, are not fully understood and have not garnered a lot of attention in terms of their advantages. There are a number of circumstances that apply only to secured credit cards, so it is important to understand them before applying for a secured credit card.
The following set of questions will help you decide if your next secured credit card is best for you:
- Are secured credit cards tracked on my credit report? Absolutely! Because of this, secured credit cards are a great way to begin building (or rebuilding) your credit. Many secured credit cards will provide monthly reports to the major credit reporting agencies, thereby helping you repair your damaged credit in a shorter amount of time. However, some credit card companies report only yearly. Before applying for a secured credit card, ask the creditor how often they report to the credit reporting agencies.
- How much money will I need to deposit? Because secured credit cards work like a debit card, you can only spend what you have deposited. Therefore, if you want a credit limit of $500, you will need to deposit $500. This money, however, will not be used to pay your credit card; unless, of course, you fail to pay it yourself. Instead, it will be kept in an interest-bearing account.
- How much of a return can I expect on my deposit? Most secured credit card companies offer about the same return as you would get on a savings account. However, there are some creditors that will offer greater returns. It is up to you to find them!
- Will my spending limit ever increase? If you have established a history of making timely payments, chances are the credit card company will reward you with an increase in your spending limit. Your responsible credit card behavior will allow you begin spending above your deposit amount.
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