Getting a credit card is a big decision that one can make in his/her life. It is a great financial tool that helps you borrow funds during times of cash crunch. However, seeing so many credit cards with membership fees can drive you away from them. To meet the needs of those who cannot get an unsecured credit card, the credit card issuers came up with secured credit cards. In this article, we have covered everything about the secured credit cards that is there to know. Without any further ado, keep reading to kick start your research.
What is a secured credit card?
A secured credit card is issued against the fixed deposit. You are required to maintain a fixed deposit with a bank for a certain period of time so that you can become eligible for the credit card. A fixed deposit act as collateral to the credit card issuer. It helps them to easily process your credit card application as they are not feared about if you fail to pay the credit card dues.
Your fixed deposit gets frozen with the bank and you cannot use it until you close your account. The credit limit on secured credit cards is equivalent to the amount of a fixed deposit.
Pros of having a secured credit card:
Given below are the advantages of having a secured credit card.
- You can easily avail of secured credit cards as compared to other credit cards.
- You can start building your credit score with this credit card.
- They are ideal for first-time credit card users as they get to understand the working of a credit card without any risk of falling into a debt trap.
- You earn rewards or cashback on using this credit card.
- You get to enjoy the exclusive offers and benefits.
Cons of having a secured credit card:
Hereunder are the disadvantages of having a secured credit card that you must know.
- The rewards/cashbacks are limited on this account.
- If you do not pay the credit card bills on time then it will be deducted from the fixed deposit amount.
- You cannot use your fixed deposit amount until you close the credit card account.
- The credit limit is lesser on these credit cards.
How to apply for a secured credit card?
It is easy to apply for a secured credit card. You can choose a mode of application that you are comfortable with from an online or an offline one. Just choose the card that matches your requirements and fill out the form, attach the required documents like age proof, income proof, residential proof, etc, submit the form and wait for the notification from the bank.
Bottom Line:
To conclude, first-time credit card users can avail of secured credit cards easily. Once you get to understand how a credit card works and have maintained your first credit card then you can move on to the next upgraded credit card that has more features and benefits. All you need to do is keep the credit card dues clear timely and maintain a low credit utilization ratio in order to maximize its benefits.
Additional Reading: 5 Common Signs Of Wrong Credit Card Usage
