Tuesday, 29 November 2011

The Reasons Behind Secured Credit Cards

For some people, a credit card is a valuable necessity that is required for use in every day life and a secured credit card solution seems pointless, after all why would need to secure you card when you don't need to? For some people, in particular those that are struggling with a bad credit history secured credit cards can be one of the only options for financial aid available.

Understanding the difference between secured credit cards and regular credit cards can be hard however it is very simple if you know about secured and unsecured loans. These cards take pretty much exactly the same principles as loans in the way that unsecured loans or cards require no upfront payments and secured do.

Secured loans require you to own a valuable item that you can use to place against the loan. Throughout your loan period a 3rd party company will hold your asset, and if you fail to repay the lending vendor can take the item in to their possession. Due to the high amounts you are usually required to take out to qualify for a loan, the item you deposit is typically a house, car or object of similar value.

The great thing about this aspect of secured credit cards is that technically if you end up in further financial trouble and really can't afford to pay off your balance, you have a backup plan which can quickly and easily wipe the debt of your shoulders. This does mean losing the valuable asset you first used as a deposit, however you will have known and understood that this could be the case from the start of your application.

The balance of a normal card is usually based on your income or your credit history and sometimes it can be hard to apply for a balance that you really need. Another great thing about secured cards is that we can have more of a say on what our cards balance is. The item we initially use, such as a car, house, jewellery or cash deposit is used to roughly calculate a suitable credit balance for us personally. This means if you use a car valued at £1500 as your deposit, you balance will either be £1500 or a slightly lower amount.

Much like any credit card there are various charges that can be applied and you should be fully aware of these before you sign for or start using your card. Standard fees you will find appearing on your bill are things like monthly interest, with a secured card you may expect a slightly smaller amount of interest and the vendor already has some guaranty that you will pay back your credit. Annual fees are charged on most of these cards and secured cards unfortunately follow the same principle, you will be charges a set amount just for having your credit card each year.

One charge you will not be familiar with Secured credit cards is an application fee. These tend to not apply to a regular card or any other form of financial solution, an application is as you'd expect from the name; a fee for applying for the service. This charge will usually be of very little value however it does mean you are paying more than most people believe you should, just to apply for a service.

Are you looking for some more information these types of credit cards, you will definitely want to take a look at Secured Credit Cards.

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1 comment:

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