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How to Choose the Right Secured Credit Card?

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If your present credit standing makes it difficult for you to qualify even for store cards, secured credit cards are something to consider. These are the aspects to look into when shopping for a secured credit card. 

Know the fees. As with other credit cards, a secured credit card may have application fees, processing fees, and annual fees. Before you apply, make sure to check on the credit card’s disclosure and evaluate the terms and conditions. Compare the card’s fees with other secured credit cards in the market. Remember not to choose an expensive secured credit card and that there’s no sense in paying more than you have to even if you have bad credit.

Inquire about the minimum security deposit. Your security deposit will only be used if you default on payments and will usually be kept in a savings account. There will be minimum and maximum deposit limits for each secured credit card so as you shop for the best card, it would be best to look for the ones with the lowest minimum requirement, as these cards will require you less money and can be the easiest to obtain.

Determine how much your credit limit will be. There are cases wherein your credit limit may be equal to your security deposit, while sometimes your security deposit may be less than your credit limit. Be sure to inquire about this so that you’ll know what to expect on your secured card.

Know the annual percentage rate. Your APR or interest rate is the rate applied to the balances you carry beyond the grace period. The APR is one of the most important factors when deciding on which card to choose because it increases the cost of finance charges whenever you carry a balance. The problem with secured credit cards is that you cannot expect them to offer the most competitive rates because they typically have higher interest rates than ordinary cards. You can, however, pay off your balances in full in order to avoid these high APRs.

Make sure your payments are reported accurately to the credit bureaus. Most probably, you are getting a secured credit card to establish credit or to repair your credit. Even if you pay off your balances in full or make your payments on time, these would have no bearing on your credit score if your secured credit card company does not report these positive payments to the credit bureaus.

Ask if you can convert your card into an unsecured credit card. One of the best features to look for in a secured credit card is if it allows you to convert it in an unsecured card after a period of making payments on time, typically between 12 to 18 months. There are a few good reasons why you would want an unsecured card, such as lower interest rates, lower or no fees at all, higher credit limits, and of course, the absence of security deposit. However, if the secured card you found offers the most favorable terms for you but cannot be converted, don’t worry, because you can always apply for an unsecured credit card once you’ve established a good credit history.

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