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How To Apply for a Secured Credit Card To Build A Credit Rating

Dec 14, 2007
Credit cards are no longer a luxury. In fact, in a list of 'five things you cannot live without', you may very well find credit cards on the number three spot. So what does it mean when you ask yourself how to apply for a secured credit card online?

A credit card is different from a debit card in that it does not remove money from your account after every transaction. So there is no need for frantic monitoring of the personal account. If this sounds enticing, you can apply for one or more of an astonishing number of credit cards on offer.

Individuals who have a poor credit history or no credit history are often advised to apply for a secured credit card in the first instance. This is a type of card which is protected by an account owned by the consumer. You can call it a down payment in simple terms. To apply for the card, you must put down 100 percent (or sometimes a little more) of the credit limit you desire into an account which will be linked to the credit card. This amount in the linked account will only be accessed by the issuer if you default on a payment.

If you do apply for a secured credit card successfully, you are expected to make the payments, as with a regular credit card, before the due date. If you default on a payment, the issuer can recover the cost of your transactions from the money that you set aside in the account linked to the card. So the issuer is safeguarded against a loss.

What is the benefit to you? Most credit card companies send reports to the credit bureaus. If you have no credit history or a poor credit history then by applying for such a card, you can build a positive credit history by being regular with your payments. Once your credit history is established, you can apply for other credit cards.

The thought of putting your deposits into the hands of the issuer before being able to get your own hands on any credit may put you off from applying for a secured card. However, it must be remembered that, although the deposit is technically totally accessible to the issuer, it will not be debited for defaulting on only a couple of payments. Your account will be debited only if there is regular, prolonged or repeated defaulting.

When you apply for a secured credit card and are approved, you may get a card with either Visa or Mastercard logo. You should be aware that card issuers generally charge a higher fee and interest rates for some cards, although it is certainly possible to get such a card without fees and with a reasonable interest rate, as well as cards which offer 0 APR for a given number of months at the start of a contract.

Someone with a poor credit history or a first time card applicant is the best candidate to apply for a secured credit card. The benefits in this case will certainly outweigh the costs.
About the Author
Gordon Goodfellow's site shows you how to apply for a secured credit card on line in addition to offering 0 APR cards which remain interest-free for years. His associate site offers credit card balance transfers UK in the UK.
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