Types of Secured Credit Card
Many people that have had bad experiences with conventional credit cards give up all hope of using any kind of credit card in the future. However, there are many types of credit cards available today, all of which have different approval methods and different terms and conditions.
Being approved for a credit card with bad credit is not impossible, but it is slightly more difficult and the options are more scarce. Sometimes, when an individual’s credit score is low enough the only option is to apply for a secured credit card. Secured credit cards are safer for the card issuer because the funds are secured by some form of collateral. While the choices are limited there are several types of secured credit cards too choose from, all of which are outlined within the following information.
Merchant Secured Credit Cards
Some secured credit cards are offered by merchants and retailers in an effort to solicit new customers. These credit cards can only be used to purchase items at a particular store or chain of stores. All items purchased with secured merchant credit cards are used as collateral in the event of payment default. In other words, when an individual purchases an item using the card, if they consistently fail to make repayments then the item may be repossessed.
Property Secured Credit Cards
There are also credit cards that are secured by the estate of the cardholder. All purchases made with these cards are attached to the home equity, which means purchases made with the card are taken from the equity of the house. Being approved for such a credit card is extremely simple as long as a property with equity is owned, however applying for these cards is not recommended and should be avoided at all costs. The possible consequences that could result from defaulting on the payments could be disastrous, causing the cardholder to lose their home and go into debt in some cases.
Bank Account Secured Credit Cards
Then there are credit cards that are secured by the balance of the cardholder’s bank account. These are considered to be the safest and most convenient type of secured credit cards, as there is no significant risk involved with using them. This type of secured credit card is very similar to a debit card, however some of them will make reports to the major credit reporting agency, making them a viable option for those trying to rebuild their credit. Before applying for a bank account secured credit card it is best to make sure that there are no interest rates associated with card, as well as minimal fees.
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