There are salient questions you should ask before you get a secured credit card. These questions put you in the light and help you know what choice to make when it comes to choosing a secured card that can best suit your needs. Here, we outline some of the questions you should ask before you get a secured credit card.
What is a Secured Credit Card?
A Secured credit card is a card that does not frequently extend actual credit. Here, you have to put down a security deposit that is typically equal to your credit limit. Secured cards are a better option than a prepaid card for those who are trying to build credit because your card usage is reported to the credit bureaus. If you use a secured card responsibly, you can start building or repairing your credit.
Your security deposit is returned when you close your account or the card issuer converts your card to an unsecured card, which comes as a result of making timely payments and keeping your account in good shape.
What Are The Fees?
Evaluate extensively and understand the fees of the secured credit card you wish to apply for. You can compare the fees on the card you are considering with the fees on other secured credit cards to get an idea of what you are paying. Some secured credit cards come with application fees, processing fees as well as annual fees. These fees are disclosed in the offer and its terms and conditions.
What Is The Minimum Security Deposit?
Secured cards are secured with a deposit that is kept in a savings account and is being used only when you default on your payments. There are minimum and maximum deposit limits.
Secured credit cards with low minimum deposits are easier to get, but also have a lower limit. Get an insight into the deposit you’re able to pay and eliminate the cards with minimum security deposit requirements outside of your budget.
What Will My Credit Limit Be?
Your credit may likely be equal to your security deposit. Some cards offer a credit limit that is different from the security deposit.
What Is The APR?
The annual percentage rate (APR) is the interest rate applied to balances you carry beyond the grace period. This means, the higher the interest rate, the higher your finance charge will be when you carry a balance.
The APR happens to be one o the most deciding factors with any credit card as it influences the cost of carrying a balance. Secured credit cards tend to have higher interest rates than unsecured credit cards, thus don’t expect to get the most competitive rate. Note, you can avoid paying interest on your balance by paying it in full every month.
Does The Creditor Report To A Credit Bureau?
Make sure that the credit card issuer reports to the major bureaus: Equifax, Experian, and TransUnion. Secured cards that do not report to the major credit bureaus won’t help your credit rating.
Is There An Option To Convert To An Unsecured Credit Card?
Good secured credits cards allow you convert to an unsecured card after a period of timely payments, like 12 to 18 months. Unsecured cards have lower fees (or no fees at all), a lower interest rate, and fewer restrictions and do not require a security deposit.
Is The Card From A Reputable Bank?
Start by doing an online search for the credit card you’re considering. Read reviews and learn what others have experienced using the card and the card issuer. Avoid cards with high-interest rates and fees as well as applying for a card from any bank that you’re in doubt.?
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