A secured credit card usually offers the same benefits as that of the other regular credit cards. Much more than that, it also provides the card holder with an opportunity to repair and ultimately improve his credit score.

Despite the potential benefits that a secured credit card can possibly provide, an aspiring card holder should not apply for the first credit card offer that he comes across with. Rather, he should consider the following questions in order to find the best secured credit card:

What are the fees?

Like any other credit card, secured credit cards come with some expenses. These may include application fees and processing fees. Another particular cost is the annual fee. The standard fees are the finance charges, the late payment fees, and over the credit limit charge. Before availing any credit card offer, the aspiring cardholder should carefully consider all the fees. Moreover, you should stay away from card offers with high fees which will eat up your security deposit.

How much is the deposit?

As the name implies, secured credit cards have collaterals. These collaterals come in the form of a security deposit which will be held in a bank account. The lending company can readily access this account and use the security deposit every time you default on your supposed payments. Before you get a secured credit card, make sure that the required security deposit is minimal. It will be better if the deposits are also placed in interest bearing accounts.

When will your security deposit be used?

The utilization of the security deposit should be a prime concern when choosing a secured credit card. Some lending companies will use the deposit only if you miss your due payments more than thrice. However, there are also some financial institutions which will automatically deduct part of your security deposit every time you miss a payment.

What will your credit limit be?

In the case of secured credit cards, the usual credit limit will be the total amount of your security deposit. However, there are some financial institutions which will allow you to use your card only up to a certain limit that amounts to half or a quarter of your security deposit. Of course, the higher the credit limit, the better the card.

What is the APR?

This refers to the interest rate that will be applied to your balances every time you miss the payment date and the grace period. The best secured credit card will be that which has the lowest annual percentage rate (APR).

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Going For Unsecured Credit Accounts

Although it is possible to get this kind of account, you should realize that this would be harder to get compared to the secured type. This is because the only thing that your debtor can hold against you is the promissory note you signed to pay your debt.

You should be prepared for a long process of interviews and paper works, for you to get approved. Additionally, the interest rate that would be given to you might also be a bit higher compared to those with good records.

Improving Your Chances with Unsecured Accounts

There are two general ways to improve your chance of getting approved, you should have:

• a good standing checking account
• a non-evaded current loan

If you don’t have both, then it is best that you formulate a payment plan, so that you can bring yourself up and have good standing on both factors.

Having a repossessed property can be a big downfall in applying for unsecured loans. This is because it would reflect longer in your credit history. Try your best to get your property back, as soon as you can, before you apply for an unsecured credit account.

Going For Secured Credit Accounts

This kind of account wouldn’t charge you with extremely high interest rates. In fact, your rate, as a bad record holder, would be just the same with good record holders. The whole process of interviews and paper works would also be lesser this time.

However, the catch is that you would have to give the company some tangible property as a security that they would get paid. Signing an agreement or promissory note is not sufficient; you have to give them physical collateral at the very beginning. Collaterals can come in various forms, such as:

• Piece of land/property
• Car/s
• A bank account where they can automatically charge your debt
• An amount of money in any bank account equivalent to your credit limit

If ever you go for secured accounts, you should keep in mind that you would need extra discipline in paying your monthly dues. This is because you might lose those properties if you don’t pay them within the agreed period of time.

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