When you borrow money from a bank you will generally have to pay interest. Secured credit cards are used when someone is looking to rebuild their credit score.
Keep reading below to find out why secured credit card rates are so high.
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Secured vs. Traditional Cards
For secured credit cards they usually require a cash deposit in order to secure any repayment you borrowed. Credit cards that require no deposit are considered unsecured.
Traditional cards use credit scores in order to determine borrowers ability to pay back their loans. Secured credit cards on the other hand can take cash on deposit so credit scores do not mean as much.
Check out this post to get a more in depth look at what a secured credit card is.
Advantages and Disadvantages of Secured
Secured credit cards are fantastic for someone who has bad credit as it allows a person to build credit. Over time you can develop a higher credit score and a chance to earn a unsecured card.
In terms of disadvantages secured cards have low limits and are restricted to the amount of collateral you borrowed.
Use of Secured Card
Those who would benefit from from a secured card would be:
- People with limited credit history
- People with low credit score
Some features of a secured credit cards to pay attention to are:
- Pay attention to credit card rates and fees
- Is the card reported to credit bureaus
- How large a deposit can made
Learn about how to get a credit card with bad credit.
Conclusion
Secured credit cards have a variety of advantages and disadvantages so hopefully reading the above can help you better understand if a secured credit card is right for you.
Additionally, If you are interested be sure to check out our list of bank bonuses, saving rates and CD rates!
