A secured credit card is a fantastic tool for building your credit from zero or for repairing a seriously damaged credit file. But, if you’re not careful, you can be a victim of scam. So, before you apply for one– understand the pros and cons of a secured credit card and the warning signs of a credit card fraud.
Pros
A secured credit card is one of the most convenient and quick source of borrowed money. It has low interest rates, making it more affordable than some other types of loans. You also get to control the borrowing limits because of the deposit you make.
Aside from secured loan, a secured card may be your only option available– because if you have no credit history or you have a bad credit, you can’t easily get any other kind of credit card. As long as you pay on time and never miss a payment all throughout the duration of your loan, you can quickly move your way up to a good score, and possibly apply for a more affordable unsecured credit card.
Cons secured credit card
Do your homework, or else you might fall into high interest secured credit cards that charges hefty fees on unpaid balance in full each month. For example, you have a $200 balance for the month of January. If you only paid $150, the secured credit card issuer shall charge interest on the unpaid $50, which will compound each month until it is fully paid.
Secured credit cards also charge annual fee and high penalty fees should you exceed your credit limit or miss a payment. The low credit limits can also work against your favor. A low credit line is easy to max out. If you do not pay off the balance quickly, it will incur huge interest and fees and ultimately damage your credit report, instead of building it.
Credit card scam
Watch out for the usual signs of a credit card fraud:
- Upfront fee to get a lower interest rate
- Emergency text or call informing you of a problem with your account. The sender requires you to give your card number or the 3-digit security number at the back of the card and other financial information they can use for fraud.
- 0% APR, very high credit limit and $0 fees that you would wonder how the lender can possibly earn money form the transaction.
In short, if you have to pay to get a secured credit card, aside from the deposit, and you need to give sensitive financial information to a suspicious caller or website, drop it. If the offer is too good to be true, don’t fall for it. Lending is a business-they must get their money’s worth by charging fees. And, legitimate credit card issuers won’t ask you to “bribe” them to give you a lower rate.
A credit clean up and repair can help you establish, clean and repair your credit history. Clean Credit can help you get upgraded to an unsecured credit card the moment your credit report is fixed. Enquire now to know how Clean Credit can help you