There are many people who are afraid of using credit cards. If you’re one of them, you might find this article helpful. So read on!
This fear of using credit cards is seldom random. More often than not, these are such people who have been defrauded online in the past, or have heard stories of such fraudulent activities like phishing, skimming, cyber attacks and so on from near and dear ones.
Then, there is also a second category of people called NTC, or New to Credit. These are typically such people who are afraid that having a credit card will lead them into financial trouble, and therefore have never applied for credit cards. They stick to their debit cards and feel safe, away from the credit bubble.
Then there is a smaller third category of people, who have a poor credit history and stay away from any form of credit line, to prevent their credit score from further going down.
If you fall in the latter two categories, that is, are new to credit, or have a poor credit history, secured credit cards are perfect for you.
Secured credit cards are issued by banks and financial institutions, against a fixed deposit and require no prior credit score. These are super helpful to build your relationship with credit and inculcate financial prudence and discipline. The best part- since these are mostly designed for NTC customers, you get instant approval and require no documentation.
Applying for a secured credit card is as easy as applying for an unsecured credit card. It is a quick and simple process and comes with a lot of benefits. For instance, it is designed for people with low or no credit history. It is a great tool if you’re looking to build your credit score. The application process is simple. And in many cases, you get an instant virtual card on activation.
So next time you hear someone tell you about some crazy discounts they got on their credit card, don’t shun them out completely. Hear all the details and make an informed decision. You might get a good deal out of it.
1. What is a secured credit card?
Secured credit cards are designed for people with poor or no prior credit history and are issued against a bank fixed deposit to lower the risk for the credit card issuers. Getting a secured card is thus one of the easiest ways to improve your credit score while availing the benefits of a credit card like cashback and other rewards. However, if you don't pay your bill on time, the issuer can secure the money from your fixed deposit.
2. What are the benefits of a secured credit card?
A secured credit card not only helps you build a better credit score with your timely payments each time your credit card bill is generated but also offers the following benefits:
3. What is the difference between a secured and prepaid credit card?
Prepaid credit cards are very similar to bank debit cards. You have to top-up a certain amount of money into your bank account and thereafter, you can spend up to a limited amount with your prepaid card. Prepaid credit cards are considered a good source of instant credit as they don’t require credit checks of any type. Secured cards, on the other hand, are issued against an FD. The FD provides the permissible credit limit to the user. One key difference among both is that prepaid cards cannot be used as a credit-building tool since they do not have any long-term benefits associated with them, while secured cards can.
4. Can I be rejected for a secured credit card?
You are not likely to get rejected for a secured credit card as you are already paying a security deposit in the form of an FD to indemnify the card issuer in case of any irregularities in payment. However, in some cases, the account still may be checked by the card provider. If the user has on record- bankruptcy, a tendency of making late payments, or other suspicious financial activities, his/her application for a secured card may get rejected.