The Secured Credit Card for insecure people
Secured credit cards are the answer to people who have problems keeping their spending in check and end up abusing their credit lines. Low credit rating, debt or general financial crisis can cripple your access to unsecured, traditional credit lines. That means no more credit card and (generally) no more economic transactions unless you can pay for them in cash.
That wasn’t that big of a problem fifty years ago but like other necessities of modernization, credit cards are an indispensable part of a consumers’ arsenal these days. What are you going to do without one, eh?
Well, what you are going to do is get a secured credit card that does not allow you to overspend beyond your means. You do not need a great credit rating to get one, all you do is deposit money in a savings account and that deposit becomes your credit line. In theory, it is not even a credit card as it is secured against your own cash deposits and is completely limited by them.
It helps however if, as mentioned previously, you’re trying to build a good credit rating, recovering from debt or financial loss or just starting in the cutthroat world of plastic money.
Paying off the fees and charges of a secured card shows that you have, or have regained, the ability to handle the responsibility of owning one. A year or so of running a secured card account will get you good credit rating and enable you to access a credit line without limit; that is, the proper thing.
That is what these cards are all about. They are short-term learning or habit making devices, they are signals of good behavior you send to the no-limit credit card providers and they are an introduction to the system itself complete with a safety net. They are the carrot dangled in front of you as you walk towards your own independent credit line. They are the bait to lure back in those who have been bitten by the system once and are now shy to wander back on their own.
However, they are always for the purpose of eventually moving on to the no-limit version. The secured versions of these things are not for people who are incapable of using credit responsibly. It makes no sense for you to withdraw money from your own savings account paying premium fees for the rest of your life just to feel like you are not missing out.
You are. These secured cards can be really costly and counter-productive in the long run. Their major, and only, usefulness is familiarity with the system and the system’s familiarity with you.
Just keep that in mind, that if you plan on getting one, it’s only to demonstrate to the limitless credit issuing companies that you can be good and play nice. Otherwise, there’s no point in paying ownership, transaction and verification costs without getting all the benefits.
Filed under: credit card