If you’re looking to build or rebuild your credit history, you may have come across the term “secured credit cards.” In this guide, we’ll take a closer look at what secured credit cards are, how they work, and their pros and cons.
Secured credit cards are credit cards that require a cash deposit as collateral. The deposit is usually equal to the credit limit, which can range from a few hundred to a few thousand dollars. The deposit serves as security for the lender in case you fail to make your payments.
Secured credit cards work like regular credit cards, but with a few key differences. You can use them to make purchases, pay bills, and build your credit history. However, you’ll need to make a deposit to open the account, and the credit limit is usually equal to the deposit.
Secured credit cards are a good option if you’re looking to build or rebuild your credit history. They’re also a good option if you’re unable to qualify for an unsecured credit card. Secured credit cards are easier to get approved for since they require a deposit as collateral.
To get a secured credit card, you’ll need to meet the following requirements:
To apply for a secured credit card, follow these steps:
Secured credit cards may have the following fees:
It’s important to read the terms and conditions carefully before applying for a secured credit card.
To use a secured credit card, follow these tips:
It can take several months to a year or more to build credit with a secured credit card. The length of time it takes depends on various factors, such as how often you use the card, how much you spend, and how quickly you pay off your balances. Generally, the longer you use the card responsibly, the better your credit score will become.
Yes, some lenders may allow you to upgrade to an unsecured credit card after a certain period of time, usually 12 to 18 months. To qualify for an upgrade, you’ll need to have a good payment history and a strong credit score.
If you’re unable to get a secured credit card or prefer not to use one, there are other options to consider:
When choosing a secured credit card, consider the following factors:
Choose a card that best meets your needs and has the lowest fees and interest rate.
To manage your secured credit card, follow these tips:
If you miss payments on a secured credit card, your credit score will be negatively affected. The lender may also charge you late fees and interest charges, and may even take legal action to collect the debt. It’s important to make your payments on time and in full every month to avoid these consequences.
To close a secured credit card account, follow these steps:
Secured credit cards are a great tool for building or rebuilding credit. They’re also a good option if you’re unable to qualify for an unsecured credit card. By following the tips outlined in this guide, you can use a secured credit card responsibly and improve your credit score over time.
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