Secured credit cards? How do I get one?

Because of the fact that credit cards are pretty much a vital part of life, in some cases you are actually going to need some type of credit to make your life easier. A great example of this is when you have to rent a car or book an airline ticket online. But the problem that some people face is that they cannot get a credit card because they have bad credit or no credit. In these types of cases your best bet is to apply for a secured credit card.

But before getting a secured credit card there are some things that you should ask yourself to make sure you are getting the best card for your needs.

Number one:
What is a secured credit card? Basically a secured credit card is a credit card that requires a cash deposit so that you can have an open line of credit on your card. Most secured credit cards have a minimum deposit but they also have a maximum deposit. But how the deposit works is that you send the company so much money and then the amount that you have sent in is how much money you can charge on your credit card. But unlike a prepaid credit card the amount you charge is not deducted from your deposit you still have to pay your balance in full each month or at least make the minimum payment due each month. All the deposit is for is if you are late on your payment or if you decide to skip out on your bills then the credit card company can use that money to pay off your balance so they don't lose money.

Number two:
Where can you get a secured credit card? There are numerous offers online for secured credit cards; all you have to do is search through the various offers to find the right one for you. But banks and credit unions that you belong to are another great place to find secured credit cards. In fact almost half of the nation's credit unions offer secured cards to members and they also offer low interest rates and no annual fees on those cards.

Number three:
What kind of charges will there be? Every secured credit card is going to charge an annual fee, but what they are going to charge you is going to vary drastically. So you are going to want to shop around and look at the various rates that are being charged. You also want to look for a card that doesn't charge you an application fee. Keep in mind that some people have gotten secured cards and found out that their entire credit limit was consumed with the various fees before they had even made one purchase.

Number four:
How much money do I have to deposit? Many cards will require that you send in around $300 to $500 dollars for your deposit but this rate is going to vary depending on the card that you choose to go with. But you also want to look at how much your credit limit is going to be with that deposit, some companies allow you to charge up to the amount of the deposit, others will either do a certain percentage above or below the amount of the deposit.

Number five:
Do all banks offer secured credit cards? The answer here is no in fact many banks are starting to lean towards only offering unsecured credit cards with low limits and high interest rates and fees to people. But that doesn't mean that secured cards aren't a good choice, in fact for many people that is their only option, especially if they are starting to rebuild after a major life event or just starting out getting credit. But also many banks are only offering secured credit cards to people who have no credit and staying away from people who have already had a chance but have blown it.

Number six:
Are there any problems to watch out for? According to the president of Consolidated Credit Counseling Services Inc. there is plenty to watch out for when it comes to secured credit cards. The president of this company talks about the fact that there are good secured cards, which have low fees and treat you like a customer rather than just some piece of meat. But you also have your bad cards that take advantage of you as a customer and extort you because of your bad credit situation. But even worse than those bad card offers you have your ugly offers which are completely horrible because they give you the card but then require you to purchase things like an insurance policy for so much money a month on top of your monthly payments.

Here are some tips on what to watch out for when applying for a secured credit card.

Tip one:
You pretty much want to watch out for everything when you are applying for a secured credit card or even a subprime credit card. The reason that you pretty much need to watch out for everything with this type of credit card is that this section of the credit card market is filled with scam artists and bottom feeders. These types of people will do anything and everything that they can to take advantage of the fact that you cannot get qualified for a normal credit card. One of the biggest scams out there is that they will ask you to pay a fee for them to find you a credit card. But you also need to watch out for the legitimate lenders in this market because they are considered bottom feeders by other lenders in their market and will often try anything to get your business.

Tip two:
Super high fees are something to watch out for when it comes to secured credit cards. Many credit card companies will charge you numerous fees just to obtain a credit card with their company. It is not unusual to find companies that charge you application fees, monthly fees for having the credit card, annual fees for having the credit card, and even program fees. So while the fees are something that can be considered normal what you want to watch out for is companies that are charging all of these fees that add up to hundreds of dollars and then only give you a credit card that has a limit of $200, not to mention they then apply all of those fees to your credit card so you have to pay off those fees before you can even start using your secured credit card.

Tip three:
when you are looking for a secured credit card you are going to want to look for a credit card that offers you reasonable terms for that style of card. In order to know what is considered reasonable you will need to know what kind of offers are going around in the credit card market and the only way you can find this out is to compare the various credit card offers for secured credit cards. But in general with a secured credit card you should be able to find one that has interest rates in the mid to upper teens. And even better you can usually find secured credit cards that do not charge an annual fee, which can help reduce the high fees you might have to pay in the long run.

Tip four:
You want to make sure that the credit card company reports to all three major credit bureaus. Sure having a secured card allows you the convenience of being able to purchase things online but it is also a great way to start rebuilding your blemished credit history. But if you get a card where the issuer doesn't report to the major credit bureaus you are going to be losing a major benefit. A great way to tell without asking if they report to the credit bureaus is if you start receiving offers for unsecured cards in the mail after you have made several on time payments. But you also want to make sure that the issuer does not report the card as a secured card when reporting to the bureaus because that can also hurt your attempt at rebuilding your credit.

Tip five:
Most companies will qualify you for an unsecured credit card after a period of making all of your payments on time. For the most part companies will switch you to an unsecured card after about one year of you making on time payments, which can include paying your bill in full each month or just paying the minimum payment each month.

Tip six:
To make the best out of your secured credit card to help improve your credit score you should make a few small purchases each month and then pay your bill off in full as soon as the bill becomes due. The one thing that you want to avoid so that you can improve your credit faster is carrying any type of balance on any type of credit card. And with secured cards you want to get rid of them as soon as possible because of the higher interest rates that they charge and the numerous fees that are associated with them.