A secured credit card is a category of credit card specially designed for people who cannot apply for a regular credit card owing to lacklustre credit rating. People having a limited or nil credit score may come across a situation where they are not able to secure regular credit cards. For them, the best credit card option is to get a secured credit card which comes with the condition that the cardholder has to make a cash deposit that would work as a collateral. This implies that if a cardholder is not in a situation to make payments, the deposit will work as security.
However, there are several myths built around secured credit cards which may hamper one’s financial decisions badly if ignored. Let’s look at 7 of such common myths and the actual truth behind them.
A lot of misconception surrounds secured credit cards. Source: TheCardScout
1. That Secured Credit Cards Are The Same As Other Prepaid/Debit Cards
In a prepaid or debit card, the money is loaded only to be spent later and then loaded again. But with a secured card, though one has to deposit money into the card, it is only for security deposit and one cannot withdraw that sum as and when required to spend and then send money to the credit card again. So basically, what distinguishes the two types of cards is that the deposit in secured credit cards works as collateral while that in a debit card the same can be used anytime.
2. That the Credit Card Company Doesn’t Return the Deposit
Many people fear that their deposit in the secured credit card is seized once and for all. But it is not at all the case. The security deposit on the secured credit card is totally and fully refundable provided you have paid your credit balance. The cardholder is free to close his account at any time and if he does this with all his credit paid, the refund on his deposit will be 100%.
3. Secured Credit Cards Are Not As Accessible As Regular Credit Cards
Due to the difference in the procedure of application, a secured credit card is often looked upon as a card which may not hold accessibility as a regular credit card does. However, this is not true. A secured credit card is totally undistinguished from any other credit card in any transaction. One can easily make purchases with a merchant with any fear of the validity of the card.
Also, a secured credit card is linked to the credit bureaus and can help you work towards building your credit score over time.
4. Payment Will Be Done Through the Credit Card Deposit
Irrespective of the fact that you have your deposit in the secured credit card, a failure to make a required minimum payment may make you a defaulter. This may initiate a fine which would be in no way connected to the deposit or charged against it. It would be best to have a thorough look at the terms and conditions before applying for any secured credit card.
5. People with Bad Credit Only Apply for Secured Credit Cards
Though the secured credit cards are generally favorable to those who may be having financial difficulties in securing a standard unsecured credit card, it is not in the least limited to just for this purpose. There is plenty of other reasons why it would be the best credit card option. For instance, those who do not have a fixed and regular income or someone who wants to live beyond the burden of debts without missing out on the pleasure of credit cards or someone migrating to another country, this can be the ideal choice. Irrespective of the need, a secured credit is more than a card made for bankrupts or those with bad credit.
6. There Is No Shifting From Secured Credit Cards to Regular Credit Cards
It can be totally understood that you may have come across a situation in your life which was financially unstable for you. To cope with such a situation, you may have hopelessly got yourself a secured credit card with the belief that you can never be eligible for a regular credit card after this. But debunk this myth! Secured credit cards earn your credit score which when having gotten strong will make you an eligible candidate to get a traditional credit card.
7. Not All Leading Credit Card Lenders Offer Security Credit Cards
Due to the misconception that secured credit cards are somewhat distinguished from traditional credit cards, it is generally presumed that the big lending institutions do not offer these cards. However, almost all the big names like Visa, Discover and MasterCard provide the services of secured credit cards on varying rates and conditions.
Therefore, it is important to get done with these common myths which hinder you from availing the best credit card options, depending on your financial situation. You can check out the credit cards by SC to know what suits your needs. It may turn out that a secured credit card may be the best option for you.