Secured Credit Card
If you are looking for a way to build credit, restore credit or repair credit, a secured credit card is an excellent option. When used effectively, secured credit cards can help you get on the road to financial recovery and financial stability.
There’s an art to using credit wisely and those men and women who have skillfully mastered this art, have numerous financial doors opened and available for them.
In order to use a credit card wisely, you must understand:
- What is a secured credit card
- How to maintain a secured credit card
- How to build credit with a secured credit card
What is a Secured Credit Card
A secured credit card is a Visa or MasterCard that a bank or credit union issues to an individual after the individual has made a security deposit. For example, Sue applies for a secured credit card with Bank of America. She deposits $300, Sue’s credit limit will be $300, the amount that she deposits for the secured credit card.
With secured credit cards, banks and credit unions will issue a secured credit card for the amount in which a person deposits. Most banks and credit unions will require a security deposit of at least $300 and no more than $5000 for the credit limit.
It is important to note that some banks and credit unions will offer a lesser amount for the security deposit. This lesser amount will depend on the type of risks to a bank or credit union. In this example, if James, a customer has a deposit relationship and has been with a financial institution for a while and has effectively managed his accounts, his bank and credit union may be willing to issue James a secured credit card with a lower down payment. There are certain account relationships that may result to a lesser security deposit, which includes:
- Customers with long term banking relationships
- Customers who maintain a good deposit relationship
- Customers who have never had a credit history
Secure Credit Cards: Bank of America Secured Credit Card
There are many banks and credit unions that offer secured credit cards. However, for this illustration, we will provide secured credit card information for Bank of America. We chose Bank of America for this example because its one of the largest banks in the world. This may not be a selling point for some. However, after reading this article who hope that you will understand the reasons why we chose Bank of America’s secured credit card. Reasons why we like Bank of America’s secured credit card:
- Security Deposit: Bank of America offers secured credit cards from $300-$5000
- Accessibility: Bank of America offers its customers many convenient ways to pay their monthly credit card payments
- Lower Deposit Option: Bank of America offers a $99 secured credit card option for people who qualify
Credit Card Security: Unauthorized Credit Card Transactions
Credit card security is vital when choosing a secured credit card. It is important to know that you can trust your bank or credit union to protect you against unauthorized credit card charges. Bank and credit unions are bounded by consumer protection laws and regulations. However, it is important to select a credit card company that is easy to do business with. Therefore, when selecting a secured credit card, it is important to shop around and ask questions of a potential bank or credit union. To protect yourself against unauthorized charges, ensure the following:
- Review your monthly statement each month for unauthorized charges
- Report unauthorized charges within 90 days to protect your ability to dispute an unauthorized charge
- Whenever possible, sign up for alerts to notify you by text messages of credit card purchases
How Does a Secured Credit Card Work: Step by Step Secured Credit Card Process
- Decide which bank or credit union where you would like to open your secured credit card
- Research the bank or credit union to determine the security deposit amount
- Apply for your secured credit online or at your local bank (you will need your security deposit at the time of application)
- Wait to received your new secured credit card
- Use your secured credit card wisely
For men and women with bad credit, a secured credit card is an excellent option to rebuild bad credit. However, we do recommend that you pay off an outstanding debts before applying for a secured credit card. To effectively build credit, you must use credit wisely. For those who have struggled with credit, work hard on repaying any outstanding debts before adding new credit debt. By doing so, you will increase your opportunities to effectively utilize your newly re-established credit.
Secured credit cards are an excellent way to build, restore and maintain a good credit history. However, the effectiveness of a secured credit card will depend on how well you manage your credit. Once you receive your new secured credit card, remember the following tips to protect your credit history:
- Do not charge more than you are able to pay in full each month
- Pay your credit card bill on or before the statement due date
- Ensure that you monitor your credit card activity to avoid unauthorized credit card charges
Share your secured credit card experiences with us, we would love to hear from you.