How to Get a Secured Credit Card
Find the Right Secured Credit Card
The market offers dozens of secured credit cards, but it’s essential to select the right one as not all of them are equal. An ideal secured card should charge low-interest rates, reasonable annual fees and have the capability of reporting your credit status to the major credit bureaus each month. It is also essential to consider secured cards with a provision that allows their conversion to an unsecured card after several months of timely payments or excellent credit score. Thorough research before applying for a secured credit card is crucial for a smooth and easy process.
Decide on the Security Deposit Amount
Secured credit cards ask for different security deposits rates with most ranging from $200 to $500 with an option of paying even more, depending on your capabilities. Some secured cards such as the Capital One Secured MasterCard charge a security deposit of as low as $49 with a credit limit of $200. It is essential that you have the security deposit on hand when applying for a secured card as you will be required to pay the full security deposit within a few days of approval. Thorough research is necessary during this step.
Apply for the Card
You can choose to apply for the secured card either online, in person or by mail. An online application is likely to be the fastest, and you can even make your security deposit via phone or by mail. Once all the transactions are approved, your secured credit card is sent to your mail address. Sometimes applications for a secured credit card are rejected mainly due to bad credit history. For instance, you could be denied a secured card if you’ve been out of bankruptcy for less than a year or if you have current felonies on other bank accounts.
Moving from Secured to Unsecured
With a good credit history, most secured credit cards automatically convert to a regular or unsecured card after 12 to 18 months. If you make timely payments and keep your balance below the credit limit, you can be positive that your secured card will convert automatically. However, if it doesn’t switch automatically after one and a half years and you are sure that you have followed the terms and conditions, you should apply for a regular credit card since there is a high probability of getting an approval.
Why Secured Credit Cards Are a Good Option
According to financial experts, getting a secured credit card is an excellent financial move. Secured credit cards offer individuals with a bad or poor credit history a chance to rebuild their credit as well as their reputation in the case of bankruptcy. They are also a starting point to obtain other forms of credit. Secured cards unlike prepaid cards also automatically report your financial transactions to at least three major credit bureaus to enable you to build your credit score. Some secured cards will automatically convert to unsecured cards within a year of good credit scores and return your original security deposit.