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Secure in my decision.Mar 22 '01 (Updated Jul 27 '01) Write an essay on this topic.The Bottom Line A properly maintained secured credit card can reflect positively on your credit history. For those not familiar with secured credit, it refers to a credit card account that requires you to place an amount of funds into a special savings account as collateral. While your credit account is open, the funds in the security account do earn a low rate of interest, but you do have no access to those funds. It simply allows the creditor to have something backing up your credit account and to offset some of the cost they will incur should you fail to pay them what you owe. Properly maintaining your account can make you eligible for credit limit increases and non-secured cards(see my epinion "A Capital Idea": http://looknforward.epinions.com/content_14403473028 ). When considering a secured credit card, you should closely review the terms. You will see many secured programs out there that aren't worth the space they take up in your trash can. If they ask you to pay a substantial fee simply to apply, forget about them. If they ask you to put up significantly more than the credit limit you will receive, forget about them. Hopefully, you should be able to find several that require no application fee and that give you a credit line greater than the deposit to your security account If the annual fee seems to high for you, then it probably is. I have had great success with Capital One. I would suggest including them in a fairly exhaustive search, but compare terms offered by other cards as well. I would suggest going to About.com and searching on "secured credit cards". Now if you decide to get a secured credit card and you properly maintain your credit account, the benefits of such an account can mirror some of the benefits of credit cards in general. It allows you some freedom in your cash flow. You can purchase an item today and not have to actually pay for it for 25 days or more, depending upon the grace period. It will allow you to have funds for emergencies without always having to carry extra cash (is the term "extra cash" an oxymoron?). In many cases, a credit card is a better way to make online purchases. You can also improve your credit profile. There are many other benefits, but I'll let you determine how it can help you best. However, it is imperative that you remember that you must properly maintain your account to see any benefit. What do I mean by properly maintaining your account? Do not do any of the things that I did when I was 17 years old and first discovered the wonderful world of credit. Don't start charging immediately. Don't even activate your account, until you are fully aware of all of the terms of that account, such as the credit limit, interest rate, and grace period. Keep in mind that companies offering credit cards (secured or not) can and will approve you for an account with different terms than the terms for which you originally applied. Don't charge over your limit. Most, if not all, credit cards will allow you to be approved for amounts slightly above your credit limit. They claim it is for your benefit in case you need it in an emergency. But they will charge you, heavily, for doing so. You can have them disable that feature by calling customer service. Don't pay your bills late. Secured credit card companies will charge you, heavily. They will most likely increase your interest rate. You will lose your grace period (for an extended period of time). Your grace period is contingent upon you paying your account in full by the due date. For that reason, I highly recommend paying your entire balance in full (every cent) each and every month. Keep a close eye on your credit account. Some companies will allow you to check it online. Others will only allow to do so by phone and your monthly statement. If you can check it online, I recommend doing so every day. Although some try to charge you for calling customer service, most companies will have an 800 number so you can check it free by phone (at minimum they should allow you to hear your balance and available credit). Finally, if you have a problem and need to speak with a customer service agent, be nice to them. I have done customer service work in the past, and I would go out of my way to help most callers, except the nasty ones. You can be firm and stand up for yourself without being nasty or rude (This applies to just about anything). If you properly maintain your account, it will reflect positively on your credit report. Once other creditors notice the positive postings on your credit report, they'll start coming out of the woodwork. Review the offers that you receive. Lenders are still not going to offer you the same credit that they would offer a supremely qualified borrower, but you should be able to get an account with better terms.  |
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