==== ====To Compare Credit Card Offers and Find the Card Thats Right For You, please visit:www.CreditResourceUSA.com==== ====Whether you have no credit or damaged credit, secured credit cards are a good tool for building agood credit history.Several months ago Tom, a member of CreditBoards.com, filed for a Chapter 7 Bankruptcy. Nowhe is in the process of rebuilding his credit history. Its a task that is not easy, but with patientpersistence he is seeing progress already. Daily he checks his credit score and is slowly seeingimprovement.1 - In addition to correcting every mistake, even the smallest ones, on his credit report, he is usinga secured credit card.2 - This secured card is an important tool in the overall process of building or rebuilding credit.Who should consider a secured credit card?Someone who has no credit history.Someone with a damaged credit history.What is a secured credit card?Secured cards are credit cards opened with a deposit into a savings account, money market orcertificate of deposit. The amount of deposit required varies from card to card, but generallyminimum amounts range from $250 - $500. These funds are considered your security and willeven earn a little interest since they are being held in a savings account. Your credit limit isdetermined by the amount you deposit into the savings account. Sometimes the limit will be for thefull amount of the deposit; other times it will be a percentage of the total.It is important to keep in mind that a secured card is a credit card, not a debit card. If full paymentsare not made each month, then interest is charged on the outstanding balance. And the lendinginstitution uses the security money to pay off the debt only as a last resort. Even though the card issecured, it is still possible to damage credit.What are the benefits of a secured credit card?Establishing credit. If you have never had a credit card, a good first step in establishing good creditis applying for a secured credit card. Assistant Professor of Economics at Austin Peay StateUniversity in Clarksville, TN, Jerry Plummer says, "A secured card is most useful for the personstarting out on their credit history, since it says that the person is willing to take the extra step to
establish credit."Reestablishing credit. If your credit history is damaged, you may only be able to qualify for asecured credit card. Using this secured card appropriately and within the set parameters will helprebuild your credit and qualify you for an unsecured card. If you have had to file for bankruptcy,however, you may not qualify until it has been discharged.Preset limit cannot be exceeded. If poor spending habits were part of the cause for bad credit,then a secured credit card will help keep spending in check.Useful for transactions that require a credit card. Hotels and car rentals require the use of a creditcard. If you dont qualify for an unsecured card but you do for a secured card, then you are stillable to make the transaction.What should I look for or avoid when shopping for a secured credit card?Fees. This is the area you will really want to research when shopping for a secured credit card.Some cards will come with fees that run into the hundreds of dollars, eating away much of thecredit you secured with the savings account. Professor Plummer says a card with no fee is thebest, but a small one-time fee can be okay. Annual fees for attractive secured cards typicallyrange from $20-$35. Be sure to watch out for hidden fees such as "registration charges" and"setup fees."Interest Rate. Just because you have no or poor credit doesnt mean you have to settle for thehighest interest rate. Interest rates for attractive secured cards should not exceed 19%. Shoparound and get the most competitive rate available.Read the fine print. Linda Tucker, Director of Education for Consumer Credit Counseling Servicefor Arkansas and Memphis, TN, stresses the importance of reading the fine print. Doing so will letyou know your exact obligations to the issuing company: for example, the grace period, whathappens if you dont make a full payment, and what fees are attached if you dont make the fullpayment. Understanding these details will help make sure you are not further damaging yourcredit.Fraudulent Offers. As with unsecured cards you need to watch out for fraudulent offers.TheFederal Trade Commission gives the following advice to protect yourself from credit card fraud:Offers of easy credit. No one can guarantee to get you credit. Before deciding whether to give youa credit card, legitimate credit providers examine your credit report.A call to a 900 number for a credit card. You pay for calls with a 900 prefix -- and you may neverreceive a credit card.Credit cards offered by "credit repair" companies or "credit clinics." These businesses also mayoffer to clean up your credit history for a fee. However, you can correct genuine mistakes oroutdated information yourself by contacting credit bureaus directly. Remember that only time andgood credit habits will restore your credit worthiness.
When will I qualify for an unsecured credit card?It can take several months to see an improvement in your credit history. Bankrate says its a goodindicator when you start receiving flyers in the mail for unsecured cards that your credit isimproving. However, its a good idea to continue taking things slowly. Using a secured card willhelp you learn healthy habits so that when you do get an unsecured credit card you remain incontrol of your spending and credit.Where can I find a secured credit card?Most companies dont advertise secured cards. But you can visit the Card Reports section ofhttp://www.CardRatings.com to find out where and how to apply. Click on the link entitled "Cardsfor Consumers with Poor or No Credit".Other tipsTom recommends sticking with only one or two cards and keeping spending to a minimum. Thegoal is to pay the card off each month.Tucker emphasizes the importance of paying the amount due each month; otherwise late fees canbe charged, interest rates raised, privileges lost, and credit history negatively affected.Make sure you are getting a credit card as opposed to a gas card or a department store card.Make sure a reputable bank or credit union, even a local one, is issuing the card. And, dontautomatically assume a bank is issuing the card.Not all issuers report to the three major credit agencies (Experian, Equifax, and TransUnion). Itsimportant to get a card that does report to all three agencies; otherwise you will be wasting yourtime. Fortunately, secured cards normally report to the credit agencies just like unsecured cards(you should verify this before applying).If you have filed for bankruptcy, you may need to wait until it has been discharged beforequalifying for a secured card.Get one only if you cannot get credit, since you have no credit record; or if you have poor credit.Plummer says, "Many companies will not even count them as credit, such as automobile F&I(Finance and Insurance) people, although they will not admit it." So, if you dont really need asecured card, you will be doing more harm than good.Finally, whatever situation you are in, no credit or poor credit, the best way to build good credit isto set up a budget and then stick with it.1 You can pay membership fees to any one of the three credit bureaus - Experian, TransUnion,and Equifax- to be able to check your credit score online daily. Visit our Credit Information section
for more details. Tom recommends purchasing Microsoft Money 2004, which comes with a one-year membership to Experian (value of $99.00).2 To find out more about correcting errors on your credit report, read our article How to CorrectMixed or Split Credit Reports.About The AuthorAmy Cooper-Arnold is a staff writer for http://www.CardRatings.com. Amy has been employed invarious accounting-related positions. She will graduate this December from Austin Peay StateUniversity with a degree in English.Article Source:http://EzineArticles.com/?expert=Amy_Cooper-Arnold==== ====To Compare Credit Card Offers and Find the Card Thats Right For You, please visit:www.CreditResourceUSA.com==== ====