Do you have bad credit or no credit at all? Are you finding that a secured credit card is the only type of card you can get? Surprisingly enough, there are many secured credit cards out there, but taking the time to find the one that offers the most benefits to you is very important. Can you get a secured credit card that offers rewards? Learn all the facts about secured credit cards.
What are Secured Credit Cards?
Secured credit cards are credit cards that are secured by cash deposits. At the time of application, the consumer must make a cash deposit. The amount of the cash deposit, which is usually at least $200, will be the amount of your credit limit. Usually, you can increase your credit limit by depositing additional money into the account.
The money is held for the entire time you have the credit card. The bank or credit card agency holds the money for collateral in case you fail to make your payments. When you pay off and close the account, you get your deposit back. Not all banks offer secured credit cards.
Are There Secured Credit Cards with Rewards?
The good news is that there are secured credit cards that offer rewards and cash back. Rewards are easier to find with unsecured credit cards but it is possible to get a secured credit card that offers rewards just as good as any other card. The type of rewards they offer can vary from card to card. Some cards offer a sign-up bonus while others give you cash back for each purchase you make with the card.
Typically, cash back comes as a percentage, usually 1%. For example, with this type of card, if you spend $500, you would get $5 back either in cash or applied to your credit card balance. Other rewards credit cards pay you points for each dollar you spend. You let the points accumulate and then cash them in for merchandise at certain retailers or for airline miles or hotel stays.
What to Look for in Secured Credit Cards
Many consumers with bad credit are so desperate to get a credit card that they grab the first one they can find. This is a mistake that can turn into a really expensive lesson. Here are some things to look for when applying for a secured credit card.
- Low interest rates: If they’re advertising a low “introductory” rate, find out what the interest will be after the introductory period.
- No or low annual fees: Some cards really do have no annual fee. It’s just a matter of finding them.
- No application fee: Application fees, along with annual fees, can quickly use up your credit limit, and if you don’t know you’ve been hit with the fees, they can also result in over-the-limit fees.
- Rewards or cash back on purchases: These allow you to get at least a little something back for what you’ve spent.
When so many secured credit cards are out there, you can afford to be selective. Take your time, research each card, and you’ll eventually find a secured card that works for you and can help you build your credit while also offering you great rewards.
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