While there are many types of credit cards available to consumers, there are very few for those with bad credit. Those looking to repair their credit have several options, one of which is a bank secured credit card. This type of credit card can help you repair your credit because it works in conjunction with your savings or checking account.
Bank secured credit cards look and work just like traditional credit cards, although they use your bank account as collateral. Whenever you can’t pay your credit card bill on the due date, the bank will take money from your account. This way, the bank always has money in case you are unable to make a payment.
Bank-secured credit cards are also ideal for people who have a history of bankruptcy or simply do not qualify for a line of credit due to poor or no credit history. These credit cards show your bank that you can afford to pay your monthly dues and that you are taking the necessary steps to rebuild or establish your credit. Over time, if you stay responsible and pay your bills on time, your bank may give you an unsecured line of credit – known as an unsecured standard credit card.
Since a bank-secured credit card only allows you to spend the money in your account, you don’t need to worry about debt. When you can’t make a payment, the bank simply takes the money out of your account. While this is a great backup plan, you should always pay your bills and never let this happen.
Just like any other credit card, a bank secured credit card has drawbacks and can hit you like a ton of bricks if you don’t use the card responsibly. The bank will charge you high interest rates and late fees whenever you don’t pay your bills on time. If you don’t start paying your bills, these fees and charges will get higher and higher, eventually causing you to deplete the account you set aside. However, if you pay your bills on time, you won’t have to worry about being hit with these types of fees.
For those who have bad credit or need to start building credit, bank secured credit cards are a great place to start. These cards allow you to get an unsecured credit card as long as you pay your bills on time. Almost all banks offer these credit cards and all you have to do is ask. Once you have kept your credit card in good standing for a period of time – you will have the satisfaction of knowing that you are taking the right steps to rebuild your credit.