Why Secured Credit Cards Are Simply A Bad Idea
PLEASE AVOID
What Is A Secured Credit Card?
A secured credit card is simply a “safe” way to build current credit, repairing bad credit, or establishing new credit but at a costly “price”.. Many people believe to think that this option is only good for people with very bad credit, with “ZERO” Credit and/or with “NO” credit history.. That is not true.. With this type of method, you have to put up your “own money” as a cash or the “security deposit” also known as a “refundable deposit” and in return, the bank now sets you up with your new secured credit card. For example lets say $300, so to not confuse you, you give the bank $300 and the bank takes your $300 and uses that to activate your new secured credit card. The bank wants you to think that you’re borrowing THEIR MONEY which they DO NOT put on your new secured credit card in the amount of $300. Now the down side is, you’re borrowing towards it – “your own money” (when you make purchases with that secured credit card) it’s unfortunate because the bank wants you to think that when you’re making those “said purchases” with that new secured credit card that you’re not spending your original $300 – but sadly you are. Another down side is making that monthly payment as well.. Many secured credit card companies they require you to pay an annual or yearly fee as well – honestly it’s just costing you not only more money at the end of the day, but it’s “ruining” your credit in the long run!
” A secured credit card is simply a credit card designed for individuals with bad credit or you may not be able to apply for a standard and/or the normal “unsecured credit cards” because of bankruptcy or other things that is negatively impacting your credit score and/or credit file.. This type of method requires a refundable deposit in exchange for a “credit limit” – in most cases the minimum is $200 to get started “
Now please avoid this method because this is NOT a great way to “build credit” or even try to ESTABLISH CREDIT with.. If you’re approved, you’ll be required to pay the so called “refundable deposit” – and the credit card company does not consider this as a “security deposit”.. The credit card issuer or lender they want you to think that you’re spending “their money” when you’re making those purchases using that said credit card, but you’re not – “you’re spending your own money”.. Another down side is when you can no longer afford to make the monthly payments, possibly the lender and/or said secured credit card issuer will or may not close the credit card account down. If they should close out that credit card account, this will put a really lovely “dent” on your credit score and mess up your credit file – so when applying for any future credit cards – you may be considered a liability…
For some good news in most very rare cases some secured credit card lenders may allow you to “upgrade” to an “unsecured credit card”.. If by chance they do approve your upgrade from a secured credit card to now an unsecured credit card, “please note your account has to be in good standing – and you must owe nothing – you should have a zero balance with available credit of said original amount” – The issuer or lender will refund your original cash “refundable deposit amount” in full..
Like most parents what they will end up doing for their kids, young adults or “teenagers”, is they will apply for a “secured credit card” in hopes this will help them “build credit” for the first time. This method is NOT the correct way and/or approach for your teenagers to start establishing their credit for the fist time. Unfortunately, teenagers and/or young adults they don’t understand the basics of “How Credit Works”. At the end of the day secured credit cards is just an awful bad idea and here is why…
Lets say your teenager starts out with a $500 secured credit card – right? The reason why this is just a bad idea and you’re setting them up for failure is because most individuals they have no clue, zero idea, what a “credit score” is and what a “credit file” is and they simply don’t understand how “credit” actually works. In most situations the parent, young adult and/or the teenager they honestly think that they have that “full amount” or $500 “to spend”. The truth is – you only have like $100 – $175 to spend, anything more then that, you’re basically “killing” your credit. 90% of the time young adults they end up “maxing” their secured credit card out or they might just spend $200, $300, or even $400 of that $500 credit limit. This is simply “hurting” your credit score and credit file – badly. And if you’re paying off the “full amount” every month that’s also a double whammy.. So if you’re spending lets say $200 – $300 per month, and every single month you’re paying that full said amount off, “making a one time payment” – trust me when I tell you this, “you’re credit score will never increase” and you’re wasting money in the long run, so please stop doing this if you are..
What you want to be doing is making sure you’re making the “minimum monthly payment”, every single month. “Payment History” makes up 35% of your credit score – not spending 50 bucks and then turning around at the end of the month and “paying off that amount” or the 50 bucks in full – no body really cares that you can pay off that 50 dollar charge, and it’s a “one time payment”. You’re honestly playing it safe. Your payment history is very very important because when you apply for “credit” and/or a loan, can you guess what you’re going to be doing in those up coming years? Right! Making those monthly payments. Lenders and/or creditors want to see your “payment history” to see if you “pay on time” and see the amounts that are being “used” and “borrowed”. Some people think just spending $25 or $50 per month and paying that said amount off every single month, month after month, will BOOST their credit score – IT DOESN’T! If it was just that easy EVERYONE would have a 750 + credit score. Horrible. Truth is credit cards aren’t bad – you just need to learn how to use them correctly..
“Learn How To Establish Credit The Right Way With Zero Credit History Now”
IS A SECURED CREDIT CREDIT WORTH IT?
Bottom Line: If you’re going to make one or two small purchases within the month and you’re able to pay the current credit card balance in full or off every month, then iMoney Daily does not recommend this credit card option for you.. Remember you’re basically spending “your own money” and repaying back debt with “your own money” on top of that in some cases also paying a “yearly fee” to keep that credit card in return for credit – just a horrible way to obtain, establish, and/or build credit.. But overall iMoney Daily does not recommend this type of method for obtaining, rebuilding or establishing brand new credit with no credit history or trying to build credit.. To learn how to the right way please click above on the learn how to establish credit the right way with zero credit history now. Again most secured credit cards will include a yearly fee.. STAY AWAY!