Whether you believe it or not, but I must tell you that there are a variety of credit cards and alternatives to the traditional credit card that we mostly use. Here I have explained you few forms of secured credit cards. It is better that you understand these options and choose any appropriate secured credit card for your particular needs.
If everything else is equal, I suggest you that you should always choose an unsecured card rather than a secured card. On secured cards interest rates are almost always as high as the interest rates of unsecured credit cards. There is no reason to choose the secured option over an unsecured credit card.
4 Secured Credit Cards to Watch out for
Here I have mentioned few secured credit cards which you should avoid choosing for your financial needs:
Credit Cards Secured By Your Purchases
Retails stores also issue few credit cards. For instance, Sears card, take collateral in the items that is purchased by you using the Sears credit card. What it means is that if you are unable to make your credit card payments, then the lenders might decide to repossess the property that has been bought by you using that card.
If you ever try to file a bankruptcy, then a secured credit card backed by collateral may cause problems with your rights under bankruptcy laws.
Credit Cards Secured By Your Home
Some credit card companies allow you to get a credit card that is linked to your home equity line of credit. When that card is used by you to make a purchase, then the purchase is secured by your home. Although you can get approval for these cards very easily but that could never be a good idea.
As if you are unable to pay off your credit card then that becomes more than a lawsuit or debt collection effort as in that case you can lose your family’s home! So rather than using a credit card secured by your home equity loan, you should take a home equity credit line with a low interest rate.
Cashed Checks From Credit Cards
Have your card company ever sent you a check in the mail? What you have to do is that you have to cash or deposit the check. You’ll receive the value of the check, but using cashed checks you will have to accept a high interest rate and from day one you would be stuck with the high balance on the account.
So rather than using cashed checks it is much better to look at credit card offers and find the one that suits you best and has a reasonable interest rate and then use that credit card wisely. You should make small purchases and pay them off each month.
Credit Cards Secured By Your Bank Account
Among the secured credit cards, this is probably the best option for you. These cards are secured by a deposit that you have at the bank, and your credit limit is equal to what you have in your account as deposit. If you are unable to make your payments, the company will just keep your deposit.
These cards could be used by those people who want to improve their credit, but if you choose to have this type of cards then at first at least make sure that the card does not charge interest on purchases, no annual fee, and that it reports your on time payments to the credit bureaus, if these conditions are not fulfilled then these cards are a waste of time and money.
If you are thinking to have a secured card, then before making your decision at least understand what each of the alternative types of credit cards are and how they work.
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