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10 Benefits of a Secured Credit Card

Struggling with no credit history or an inadequate credit score plagues nearly four out of 10 consumers. A significant 39% of the American population has credit scores of 669 or less. This puts millions of people into subprime and high risk categories, making it tough for them to get a credit card.

Credit cards, while not necessary, offer significant advantages. That’s why so many folks carry them in their wallets and rely on them to make purchases. After all, credit cards allow for cashless transactions and make ordering online breezier. They can also offer protections and perks. But how do you get one if your credit score isn’t high?

The easiest answer is with a secured credit card. This type of credit card is secured against a money deposit, which lowers or negates the risk of default. In fact, secured credit cards are advantageous for both the issuer and the card holder.

If you’re not able to get a general credit card, you’ll want to learn the benefits to opting for a secured alternative.

1. You are almost guaranteed to be approved.

Nearly everyone can get a secured credit card no matter what your credit looks like. All you need is to have enough cash on hand to apply for and open up the account. Some secured credit card providers ask for a minimum deposit, though. Be sure to ask about minimums when you’re considering any card offer.

2. You do not have to have perfect credit.

Hearing “no” goes along with the territory if your credit took a hit and you’re sitting on a poor or fair score. It’s nice to know that secured credit cards aren’t out of your reach just because you stumbled financially. To be sure that you’re eligible for any card, always read the fine print. That way, you won’t waste time with a card that’s out of your credit score range right now.

3. You get to set and control your spending limit.

Typically, your spending limit with a secured credit card will equal your cash deposit. Consequently, if you put down $1,000 as a deposit, you can spend up to that amount. Of course, you won’t want to max out your credit. Whenever possible, keep credit card utilization around the 30% range, which would be $300 with a $1,000 ceiling.

4. You can build back an inadequate credit score.

Poor credit happens for a variety of reasons. Maybe you were surprised by a huge medical bill. Or you lost your job and couldn’t keep up with bills. Perhaps you filed for bankruptcy. With a secured credit card, your on-time payments will be reported to the credit bureaus. Depending upon how low your score is, you could see a sizable bump in several months.

5. You can practice better money management skills.

Have you found it difficult to handle your finances? Now is the time to change your habits. A secured credit card with a limiting spending limit can be a first step. Use it to tame your spendaholic behaviors and get yourself on a path to wiser fiscal management.

6. You may be able to get back your security cash deposit.

After you build your credit with a secured credit card, you may want to switch to other credit cards. These could include credit cards with perks or just a run-of-the-mill card. When you close your secured card account, you may be able to get some or all of your deposit back. Do a little research on this before choosing a secured card issuer.

7. You can earn appealing rewards with some issuers.

Occasionally, secured credit card companies offer their users certain perks. These could include credit monitoring protection, special insurance, or even points awards. This isn’t common with secured cards, but some issuers advertise rewards from time to time to boost applications.

8. You may not have to pay an annual fee.

Annual fee rates for secured credit cards vary according to the financial institutions backing the cards. Some ask you to pay an annual fee, which is usually a fairly nominal amount. Others ask for no fees at all. Obviously, you’ll want to lean toward the no-fee variety if you can.

9. You have lots of secured cards to choose from.

If you’ve never investigated the wide range of secured credit cards before, you’ll be happy to see all the choices. Still, you’ll need to evaluate all of them against each other to pick the right one for you. But it’s good to know that you’re not going to be locked into one provider.

10. You can get approved for a secured card as a student.

Let’s say you’re in college or just starting out professionally. You want to begin building credit, but no card issuer will touch you. Even student credit cards seem out of your reach. That’s where a secured credit card comes in. Yes, you’ll have to put down the cash deposit. Yet unlike a prepaid card, your secured card will help you establish a good credit history. By the time you graduate (or your student graduates,) you’ll have a baseline credit score.

To get most credit cards, you need to have some form of credit. If it’s bad or non-existent, you’ll be better off researching secured credit cards than only using cash and checks. It takes time and patience to restore lagging credit, but it’s more doable than you might have suspected. 



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