A secured credit card is a great way to build up your credit. It’s also a good way to start building credit if you don’t have any. The debate of a secured vs unsecured credit card has been going on for a while as people aren’t sure which to get.
Secured cards are easy to get and often come with low APRs and no annual fees, making them a good option for students who want to start building credit or people who need a small business loan.
According to SoFi, “an unsecured credit card doesn’t require a deposit or collateral. Instead, you’re offered a credit limit based on your creditworthiness and other factors, such as your income and existing debt. The lender simply has your word that you’ll pay back what you borrow, which is why you’ll also generally need a higher credit score and a more robust credit history to qualify.”
But what are the benefits of a secured credit card?
Helps Improve Credit
A credit card can be an easy way to build your credit history. It’s not the only way, but it is an option that many people use. If you don’t have any type of credit history yet, one of the best ways to start building it quickly is with a secured card.
Secured cards are also useful for helping people who have bad or no credit improve their scores by demonstrating responsible use of a line of credit over time. People who have struggled with financial problems in the past may benefit from having access to a secure card because they can prove themselves capable of using one responsibly and paying off their balance each month without getting into trouble again.
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High Approval Rate
If you have a bad credit score and are looking for a way to improve it, consider getting a secured credit card. Secured cards tend to have a high approval rate because you must put down collateral to cover your spending limit. This shows that you are a responsible borrower who can pay off your debt on time every month. It’s also a great way to build or rebuild your credit history in general and show that you can handle higher amounts of debt (as opposed to unsecured lines of credit).
Rewards Programs and Other Benefits Available
The rewards program is many people’s most appealing aspect of credit cards. You can earn points or miles for your purchases, which can be redeemed for travel, gift cards, and more. Some rewards programs also offer special perks like complimentary hotel stays or airline lounge access. Additionally, you may get special offers from retailers through your card issuer’s marketing department.
In addition to these benefits that can make using a secured card worthwhile, there are a few fees associated with this type of account: no annual fee and no foreign transaction fees (if you plan on traveling internationally). Your card will also come with credit reporting that includes your payment history so that you can accurately see how well you’ve been managing debt in the past year or two.
Consistent Access to Credit
It’s true that there are many benefits to having a secured credit card. But as with any financial product, there are also some drawbacks. It should be noted that these cons only apply to people who plan on using the card regularly and consistently. So if you’re going to pay off your balance every month, this won’t affect you.
When deciding whether or not it’s worth getting a secured credit card, make sure you look at all aspects of the decision with an open mind before making your choice.
As you can see from the pros above, having a secured credit card is a great way to build your credit and get back on track. You can also use it for emergencies and other financial needs as well. Having this type of card helps your score because it shows you’re willing to be responsible with money again.