The Pros And Cons Of A Secured Credit Card
Trying to get a credit card to establish credit when you don’t have any credit at all can be a tricky situation. For this reason, people often look to secured credit cards to start building credit, which can be easier to obtain than unsecured cards, though require deposits
Today, we’re going to look at the pros and cons of secured credit cards to help you determine whether or not getting one is the right choice for your needs.
Pros of Secured Credit Cards
For starters, it’s typically pretty easy to get approved for a secured credit card if you’re unable to get approval for a traditional credit card. The reason it’s so easy to get approval is that the risk belongs to the consumer, not the credit card issuer.
They Report To Bureaus
People will often look to prepaid credit cards before secured credit cards. However, these cards act a lot like debit cards in that they don’t report to credit bureaus. A secured credit card will send out your account history to the major credit bureaus so they can include it on your credit report.
Can Help Establish Credit
If you want to establish or reestablish your credit, a secured credit card is a great option. Because payments are included in your credit report, the act of simply managing your credit card balance and paying on time will boost your score.
You Can Earn Rewards
There are some secured credit cards, such as Navy Federal and Discover cards, which offer rewards on certain purchases.
Cons of Secured Credit Cards
Though secured credit cards might sound appealing to those who are looking to increase their credit scores, they come with a few notable disadvantages.
Even if you only have to spend a few-hundred dollars on your security deposit, coming up with the money might be difficult.
Sometimes, lenders will ask for additional fees beyond the security deposit depending on the card. For example, you may end up having to pay a processing fee or an application fee. Some secured cards even require annual fees.
We hope that you’ve found the information in this article helpful and useful on your journey to good credit.
If getting a secured credit card doesn’t sound like the right choice for you, you’re in luck. There are a few other ways to potentially increase your credit score without a credit card, such as authorized user tradelines.
You can purchase tradelines to take advantage of years of positive credit history, improving accounts that are in good standing.
Make sure to get in touch with us here at Boost Credit 101 to learn more! We look forward to hearing from you.