How To Build Your Credit With a Secured Credit Card – Repair and Rebuild Your Credit

Are you one of those people who has abused their credit cards and amassed a large amount of debt that you can’t pay off? Are you wondering how do I build credit now? If you are suffering with credit problems, have no credit, or just starting out? If so, a secured credit card may be your best option for you. Statistical data shows increased number of parents are turning to secured credit cards as a way to teach teenagers and college students about responsible financial spending and building credit.

Understanding Secured Credit Cards

A secured credit card is a credit card that is secured by funds deposited to the company that issues the secured credit card. Your own deposited money is used as collateral to secure the limit on the card which prevents credit problems from happening. These usually have a minimum deposit requirement that ranges from $100-$500. Sometimes your limit will be for the full deposit amount and other times it will be a percentage of the total.

Shop Around

Finding a secured card that fits your financial lifestyle is very important. Try to get a secured Visa or MasterCard or ask your local bank if they offer secured cards. Many national banks are starting to offer this service. Sometimes third party cards are not accepted at major retailers. Before you choose a cards make sure you understand the application and annual fees, finance charges, accrued interest on the deposit as well as your available line of credit.

Ideally, the card you select would have the following:

• Have no application fee or a low application fee

• Have a low annual fee and APR

• Be reported to all three credit bureaus

• Convert to a regular, unsecured credit card after 12 to 18 months of on-time payments

Cards with no application fee or low fees

Compare your offers and search for the one with the lowest fees. Most secured cards have small fees so try to find one that only charges an annual fee and doesn’t require a monthly maintenance fee.

Cards that help build your credit

A secured card that reports monthly to the three major credit bureaus will help you build credit. If the card issuer doesn’t report to a bureau, the card won’t help you build a good credit history. You credit score will start improving with the reporting of a positive payment history. The longer you pay your balances each month the better your credit score will be. A secured card is a great vehicle to rebuild your credit but you must use it responsibly to avoid running into credit problems.

Cards with low APR

Try and find a card with the lowest APR. The APR, or annual percentage rate, is the interest rate applied to your balances that you carry after the grace period. The best unsecured card should offer a decent APR that runs through the life of the card and is not some teaser rate of 0 percent APR that changes after 6 months to 1 year.

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