Do you ever just think about your credit score and just-
Whether you trashed your score in the past, have a low score in general, or don’t even have a score, there may be many reasons why you want to raise it. Credit scores are important for a lot of things such as buying a house, financing a car, or even renting. So it’s always a good to think about.
There are a lot of questions that come with raising your credit score, and one of them is: what is the difference between a secured credit card and an unsecured credit card?
The Breakdown:
The simple answer is an unsecured card is a traditional credit card. Money is lent to you by the credit card company whenever you buy something on the card, then you (theoretically) pay it back later.
A secured card, on the other hand, is like borrowing money from yourself. Sounds weird? Let me explain.
You get a secured card for $500. Instead of the credit card company funding the money you spend on your credit card until you pay it back, you fund it yourself.
When you first open your secured card, you also pay $500 as a security deposit of sorts. The rest of it works like a regular card. You borrow money by swiping the card, you set that amount aside for later in cash, and pay it back to the company at the end of the month.
While you do this, you are building credit as long as you don’t have any late payments.
If someone doesn’t make their payments on a secured card, the company will just take the money put down as a deposit for collateral. Because it’s less risky for the credit card companies (they pretty much have nothing to lose), secured cards are usually easier to get, and they can still help you to build credit in the same way an unsecured card does.
Pros and Cons of Secured Credit Cards:
Pros:
-Easier to get than a traditional unsecured credit card
-You don’t always have to have a good score (or any for that matter!) to get one (an unsecured card you do)
-Great for people first getting the hang of credit cards: it’s kind of like being on training wheels!
-Helps to build credit, especially for beginners and people with really low scores
-Can help rebuild credit if you have a bad track record
Cons:
-Have to fund the card initially (although you can find cards with very small minimum deposits to start)
-May not have as many perks as an unsecured card
Conclusion:
Because of the many benefits of secured credit cards, I would recommend a secured card to anyone who is new to credit cards, needs to establish a credit score, has bad spending habits with previous credit cards, or has a low credit score that won’t qualify them for unsecured cards.
Overall, secured credit cards are a great and accessible tool to those who are looking to raise their credit score. Now that you know about this tool, it’s time for a happy dance!
#whatisasecuredcreditcard #increasingcreditscore #bestwaytoincreasecreditscore #beyondthebudget #helpwithfinances #howtobuildcredit #creditcardforcollegestudents #howdoesasecuredcreditcardwork #easywaytoincreasecreditscore #personalfinances #creditcards #typesofcreditcards #bestwaytoraisecreditscore #creditcardsforbeginners #firstcreditcard #raisingcreditscore
Comments