Credit cards are a great way to manage your finances, especially if you have multiple expenditures. However, in today’s financial industry, plenty of financial institutes are rejecting credit card application based on the applicant’s poor financial history.
However, all is not lost. Although you may possess a bad credit score, there are ways and means you can still get this credit card. One way to do so is by opting for a secured credit card. A secured credit card is provided to applicants who provide a collateral of equal value. In most cases, it is a termed deposit.
In this case, most banks and financial institutes will offer a credit limit which is up to 85% of the amount stored in the termed deposit. In the event you default on your card payments, the amount in your termed deposit will be seized. During this time, the termed deposit will continue to earn interest like a normally termed deposit.
Who should opt for this credit card?
For those who possess a low credit score or even a low credit history, this card is the best option. Additionally, those who are currently self – employed or unemployed can also opt for this card. Individuals who also do not match the income criteria of certain banks can opt for this type of card. Applicants who also reside in a blacklisted area or address can use this card. This also works for a company that has been blacklisted by banks or financial institutes.
What is the advantage of this type of credit card?
There are plenty of advantages of possessing this type of credit card. They include the following:
- An applicant can use it to improve one’s credit score. By using this credit card on a regular basis with timely repayment, the credit score of an applicant will improve over time
- Bad history is as valuable as no credit history. If you are not part of the credit score system, secured credit cards are your way in. Although possessing a bank account with a debt component will improve your financial profile, a credit card will go a long way. Eventually, you can apply for a loan with the required loan rates you want.
- Although you may put up your termed deposit as collateral, you will still continue to earn interest. In this way, your investment is still secured while improving your financial profile.
- A secured credit card is a better alternative to liquidating your termed deposits in the event you need emergency cash.
You can also increase your credit limit for your credit cards, to a better rate. Depending on the collateral value you provide, you can get a higher rate of credit limit that what a bank would provide you on a normal card.