More than 80 percent of consumers in the world use credit cards to pay for their purchases. Credit cards provide a convenient way for people to buy goods without carrying around a lump of cash. Additionally, some credit cards have benefits such as cash back and point rewards. Consumers with poor credit may have trouble obtaining a traditional credit card. A secured credit card can help a person to raise his or her credit score while still reaping the benefits that come along with a standard credit card.
What Is a Secured Credit Card?
A secured credit card is a credit card that uses a security deposit as its collateral. A consumer with bad credit can obtain a secured card by completing an application. The credit card company will request a deposit that will equal part of the initial balance. Some credit card companies will offer a credit balance that is 50 percent more than the deposit. Other companies will only fund the card with an amount of money that is equal to the security deposit. This allows the consumer the opportunity to prove himself or herself worthy of credit. There is minimal risk for the credit card company, and the consumer gets to possess a reliable Visa or MasterCard product.
A consumer can use a secured credit card at any of the millions of locations that accept Visa and MasterCard items. No one knows that the card is secured except the credit card company and the consumer. The consumer can use the secured card to purchase goods such as clothing, household items, electronics, food, fuel, and more. Additionally, the cardholder can use the card for online purchases as well as in-store purchases.
Improving a Credit Score with a Secured Credit Card
As previously mentioned, a secured credit card works the same way a regular credit card works. Every time the cardholder pays his or her monthly payment, the card company reports the payment to the three major credit bureaus. Each timely payment can raise that person's credit score significantly. Additionally, his or her credit score will rise each month that he or she keeps the card. Credit scores are calculated using a number of factors such as the longevity of an account, the account balance, the payment history and more. A secured credit card can help a consumer restore his or her credit and get back to financial health.