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what do I need to know about, before applying for a secured credit card?

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  • what do I need to know about, before applying for a secured credit card?


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Answer #1 | 19/12 2013 20:22
A credit card is for purchases you need to make when you do not have the ready cash on hand. You buy something, the purchase is recorded and then you receive a bill for that purchase plus any interest charged. The biggest thing to remember about credit cards, whether secured or unsecured, is that in order to build credit, you must pay on time every single month. Secured cards are those where you deposit a specific amount of money--say $300-500--and the card company issues you a card with that amount as your credit limit. It means you cannot charge more than that amount, and that if you default on the card, (i.e. don't pay your bill) then they keep your money. After a while, they may refund your money to you and allow you to use UNsecured credit. Not ALL secured cards do this, however. Some simply keep the money on deposit and you ALWAYS have that sort of account. These secured accounts do not build credit fast and they don't build as much credit as unsecured accounts. However, if you have never had a credit card before, they are almost your only option for the first card. APR is Annual Percentage Rate. That's the amount (expressed as a percentage) of how much interest you will be charged on your unpaid balance every month. The annual fee is a usurious amount of money they charge you every year simply to HAVE the account. Some cards charge very high annual fees--you want to avoid these if possible. You do not want to pay an annual fee. Some cards also charge you interest based on the TIME you pay your bill--if you pay it immediately upon receipt, or even before a purchase has been recorded on your bill, you can sometimes avoid paying interest on that purchase, though you will still be charged for any unpaid balance you haven't paid yet. The best cards are ones with the LOWEST APRs, no annual fee, and those that are not secured. These cards are reserved for people with good credit ratings and a proven credit history. After you have had your card for more than one year, you'll see your credit rating change--either up or down, depending on whether you paid on time every month and made a payment more than the minimum payment required. If you didn't, or if you were late, the card company can charge you a HIGHER interest rate than the one you thought you were getting--read the fine print on the brochure or the agreement for the card you apply for. You may THINK your APR is 18%, but if you're late one month that could jump to higher than 25%. You could also be charged a fee for late payment--in addition to the interest and the other fees. If you miss a payment, you could lose your deposit and never get it refunded to you and owe the balance at that higher rate of interest until it is paid off and you close the account. If you DON'T use the card at all, you can also be charged a Non-activity fee! Read everything in the credit card agreement. EVERYTHING. Find out what you pay for late payments, missing payments or no activity. Find out how long they will hold your security deposit--and if they will refund it to you and make the card unsecured after a period of time. If they don't, look for another company before applying. High fees and varying rates of interest can really make these cards hard to handle, and you can find yourself deeper in debt than you can afford to be. Also, remember there are some things that lower your credit score--such as applying for multiple accounts in a short period of time. Inquiries about opening new credit lower your score overall. Don't apply to several places--read the fine print and pick out ONE company to apply to instead. Use your account for purchases you KNOW you can pay off--you shouldn't charge more than you can safely pay off in one month's time. You don't HAVE to pay it off every month--in fact, that may have a negative effect if you do--because you do not want that low-activity or non-activity fee either--but you shouldn't carry a balance you can't pay for. EVER. And always always always pay on time and pay more than the minimum payment. Good luck.
Positive: 82 %
Answer #2 | 21/12 2013 08:06
A credit card is for purchases you need to make when you do not have the ready cash on hand. You buy something, the purchase is recorded and then you receive a bill for that purchase plus any interest charged. The biggest thing to remember about credit cards, whether secured or unsecured, is that in order to build credit, you must pay on time every single month. Secured cards are those where you deposit a specific amount of money--say $300-500--and the card company issues you a card with that amount as your credit limit. It means you cannot charge more than that amount, and that if you default on the card, (i.e. don't pay your bill) then they keep your money. After a while, they may refund your money to you and allow you to use UNsecured credit. Not ALL secured cards do this, however. Some simply keep the money on deposit and you ALWAYS have that sort of account. These secured accounts do not build credit fast and they don't build as much credit as unsecured accounts. However, if you have never had a credit card before, they are almost your only option for the first card.
Positive: 76 %

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