If you’re in the process of rebuilding your credit, the process of doing so may seem quite intimidating. There is a lot to learn – and it can be difficult to know where to start if you need to rebuild a credit score that’s been damaged by outstanding credit card debt, foreclosure, or bankruptcy.
Luckily for you, credit card companies have come up with a solution that’s built specifically for people who are dealing with a poor credit score, or who have only just started building up their credit history – secured credit cards.
What Is A Secured Credit Card?
A secured credit card is a specialized credit card that’s “secured” by a deposit that you make when you sign up for the card. You send a specific amount of money to the company – and then they issue you a credit card with a credit limit that equals the deposit that you made.
For example, if you put $500 on the card, you can charge up to $500 per month. This lets you choose a credit limit that’s right for you.
Now that you know what a secured credit card is, let’s discuss a few of the advantages of having a secured credit card.
- You Can’t Get Yourself Into More Debt
This is the #1 reason to use a secured credit card, rather than a traditional credit card, when you’re trying to rebuild your credit. Secured credit cards do not allow you to get into more debt.
Why? It’s simple. If you start to default on your payments, your credit card company won’t keep just piling on interest. They’ll shut down your account, take your deposit as payment, and that will be the end of it.
Your late/nonpayments will still hurt your credit score, of course – so you shouldn’t avoid paying your secured credit card – but it’s nice to know that you can enjoy the benefits of using a credit card without worrying about overspending.
- It’s Easy To Qualify
Because you provide a large deposit to your credit card company when you apply for the card, there is little to no risk for the company. This means that they are more likely to accept your application.
This is important because it’s often very difficult to get approved for credit cards if you have a credit score of under 600 – despite the fact that having credit cards is often the only way to build up your score!
- Lower APRs
Most secured credit cards have an APR ranging from 11-22%, while traditional credit cards usually have a 13-27% APR. In general, secured credit cards will have somewhat lower APRs compared to traditional cards – though this does vary somewhat depending on who issues the card.
- You Can Earn Interest On Your Deposit
There are some credit card companies that let you earn interest on the deposit that you make for your secured credit card. For example, USAA has a secured credit card that lets you earn 0.54% or more on your deposit. Obviously, this is not enough money to make you rich – but it’s nice to know that your money is not being wasted.
Get A Secured Credit Card – And Rebuild Your Credit
Having a good credit score is important for many things – especially for applying for a car loan. If you need a car, having good credit ensures that you get a good rate on your auto loan.
Need a car in Canada with bad credit? Don’t worry. At Ride Time, we specialize in working with Canadians who have less-than-stellar credit. Browse our selection of high-quality used cars today, and get in touch – even if you have bad credit, we can get you into a reliable used car!