A credit card is one of those things that just won't go away in the modern world. In fact, it has become so important to us that we need one to rent a car, make a hotel reservation, or even just buy a comic book online. More than that, credit cards are one way that creditors look at our credit history, and they can make or break our chances of getting a good loan, an apartment, or a job. So what do we do if we've completely ruined our credit? We use credit cards with a deposit.
You can use secured credit cards instead of regular credit cards. A secured credit card can help you build or fix your credit, whether you have bad credit that needs to be fixed right away, can't get a credit card, or are new to the credit world.
How does it work?
A secured credit card is a mix between a credit card and a debit card. It needs cash as security, which must be put into an account. Then, that amount will be your credit line. So, if you put $700 in your account, you can only buy things worth up to $700 with your secured credit card. You have to pay it back, though.
Some banks will give you more credit if you are a good customer and pay your bills on time, or they might let you charge up to a certain percentage more than the amount you put in. For that kind of use, you only have to pay a small amount of interest.
How much is the least you can put down?
Depending on the type of card you choose or the bank, most secured credit cards will require a deposit starting at $300. You can add as much as you want at a later time.
What to look for in a credit card with a deposit
Secured credit cards have higher rates and annual fees than cards that don't require a deposit. When looking for a secured card, make sure to choose one that doesn't charge an application fee. You will have to pay a fee every year, so choose a secured card with a fee that is not too high.
Watch out for secured credit card agreements that hide fees or useless extras that you don't really need. For example, a credit card company might approve your application for a secured card as long as you agree to pay $50 a month for insurance.
Where can I get a credit card with a deposit?
Some banks don't offer secured credit cards, but you can still check with your local banks to see if they still do. You can also check with your credit union, since many of them offer these cards to members only.
Getting good credit with secured credit cards
Most banks give secured credit cards to people who have never had credit before. However, many people use secured credit cards to help rebuild their credit. To do this, people only need to use their secured cards and make sure that each month's bill is paid. By showing that they can be trusted, a consumer builds up good credit.
Where secured credit cards are going
Many people still choose secured credit cards, but many are giving up their secured cards in favour of unsecured ones. Unsecured cards are appealing in part because they don't need cash as collateral. A secured credit card is still a good choice, especially for people who are trying to build or rebuild their credit.
