If you are trying to establish a credit history or rebuild one, a secured credit card is an excellent way to achieve this. How these cards work is you make a deposit that serves as collateral for the account and your credit limit. From there, you can make regular purchases just as you would with a credit card and the lender will assess finance charges and may report your payment histories to each of the three credit bureaus. This means by making punctual payments you build a satisfactory account and bolster your credit score. To help you find the right card, here are a few tips to assist you.
Comparison Shop for Cards
This is one of the best ways to find the right secured credit card for you. When you examine cards be sure you investigate the fees the lender charges, if they report your payment information to the credit bureaus and whether there are special restrictions on the account such as you having to carry insurance. It's ideal that you choose a card that reports your payments to the credit bureau and doesn't require an annual fee. Armed with this information, it can help you whittle down the choices until you find the most appropriate card for you.
Prioritize Your Needs
Along with building your credit score, a secured credit card can offer you many benefits. With this in mind, it's important that you prioritize what you want from your card. Whether you are looking for a card that offers flexibility such as the ability to increase the credit limit over time or one that offers zero liability on fraudulent purchases, by assessing your needs first it can help you identify the right option.
Consider Your Local Bank
If you have an established relationship with a financial institution, it's a good idea to ask if they offer secured credit cards. This is an excellent avenue for you to pursue because they might be more flexible on rates with your card since you already have a relationship with them. In turn, this may give you the option to build a good credit history while also paying less.
Research the Lender's Reputation
Similar to other forms of credit, with secured credit cards there are great lenders and bad ones. One of the ways to identify the good from the bad is by the fees and requirements they make. For example, if a lender is willing to offer you a secured credit card with no annual limit and no restrictions whereas another one wants you to pay a costly insurance premium monthly, then it's pretty simple to see which bank is the better one. In addition, you can research a lender's reputation online by using the Better Business Bureau's website. The bureau assesses a grade from A to F in part on customer service. If you notice the lender has many unresolved customer complaints it should raise a red flag. Ultimately, by researching a lender's reputation it ensures you receive a fair deal while you are working to build your credit.