Building Your Financial Credit: Using Secured Credit Cards
Are you having problems qualifying for a credit card? Cash secured credit cards are obtainable by anyone and are a great stepping stone to greater financial freedom. They’re also key tools to use if you need to establish or reestablish damaged credit.
Any number of reasons may exist in your life right now that might make it difficult to qualify for a standard credit card: bankruptcy, divorce, poor credit history or no credit history at all. If you find it difficult or impossible to qualify for a credit card, a cash secured credit card is the answer to your needs – they give you the opportunity to build a credit history, posturing yourself for more advanced credit products.
A secured or prepaid credit card is usable in all applications where a standard credit card is accepted; the difference is that with a prepaid card the charges are backed by money that you deposit before you use the card. Banks differ in the amount of money that they require up front, but the amount is usually between $0 and $500. As you might imagine, cards that require smaller balances usually change greater fees for account maintenance than those cards that require balances up front, but they give you the opportunity to build a positive balance incrementally, spreading out the initial outlay of cash.
The most important thing to remember is that even though these cards are funded by your own cash, they report your usage and payment performance to the three big credit bureaus just as standard credit card vendors do. So ? with a Secured Credit Card you are guaranteed acceptance, and you are given the opportunity to demonstrate your willingness to make payments on time, which will have a positive impact on your credit score. (Of course, it?s important to maintain the account ? this means keeping the balance at an acceptable level, and making payments before they are due.)
Once you have used your secured credit card for twelve or eighteen months, and have made your payments on time consistently, the credit card vendor will be happy to convert your secured or prepaid status to a standard credit card – you’ve shown that you are a valuable customer! If you continue to maintain your account, you will be on your way to building (or rebuilding) a good credit history that you can continue to build on with increasingly flexible credit products. In my next article I’ll describe how you can move to the next step, building on the credit that you establish with a secured credit card.
