Many times in life, we face such situations where we desperately want a specific object, but have no cash available for it. Other than that, sometimes we also get into useless debt crisis, due to silly expenditure. Credit cards are no wonder extremely beneficial for us, but they also have great capacity of creating problems particularly for those who are a bit of a spendthrift. Once you run into debts owing to a particular credit card you are most likely to get another one to clear up the bills of the previous one. It gradually becomes a vicious cycle. But a new credit card cannot be granted if you have a poor credit history. Getting a hold of one would have been very hard if it weren't for secured credit cards.
Secured credit card is basically a card which is secured by a specific amount of credit which is usually kept in your account. Secured credit card functions just like your regular account, but offers a lot more ease as you are not required to get your money via bank or ATM. Moreover, you can never run into debt as long as you use this credit card since it allows you to use that amount which you already have deposited.
This amount depends on the money in your deposit account and is usually between 50% and 100% of the total money. For example if you have 20,000 dollars in your account, your credit will range anywhere between 10,000 dollars to 20,000 dollars. However, the precise figure relies largely upon the financial institution you are getting your card from and also on the kind of your card as well. Sometimes you may also find various enticements given to cardholders. The one which is really eye catching is the offer which allows you to have an access to a much higher credit even with a small credit in your account; this often is up to 1000% of your entire money.
Like all the other types of credit cards, this card also needs you to clear up all your monthly bills in time. Your deposit account is only kept as collateral and only used if you fail to pay the required amount. This helps you maintain and even improve credit records as you are not negatively reported for the times you fail to pay the whole sum.
Actually, even if you have kept the deposit account as the insurance and the bank has access to it, it is not touched right away. Even if you fail to pay the entire sum for a couple of times, the banks neither takes the amount from your deposits nor does it report you negatively; rather they generally wait till the closure of account and inform you about the debt. If you don't pay up even after 5-6 months, they cease your deposit account, and by then your debt amount may actually add up to be more than your deposits. This is partly because of the extra interest quotient for the delayed period.
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