Secured Credit Card – Benefits
By Mory Brenner, Esq.
Q. What are the benefits of a secured credit card and why would I want one?
A. Most people looking at secured credits cards began by looking for a standard unsecured credit card and found they did not qualify. Secured credit cards allow consumers to get most of the features of a standard credit card and even some extra benefits. So the first and most important fact about a secured credit card revolves around the concept that a secured credit card account will be granted to almost everyone, even if they have bad credit or no credit at all.
Q. Why might I want a credit card?
A. Even if you like to pay for everything by cash or check you need a credit card to rent a car or to purchase things online. For those not inclined to pay by cash or check, credit cards can offer tremendous convenience for almost all purchases and services in your daily life.
Q. Does a secured credit help me in any other ways?
A. Good secured credit cards report your payment history to the credit bureaus. That means that you can obtain a secured credit card with no credit or bad credit and as long as you make timely proper payments on your secured credit card your credit score should improve.
Q. Can a secured credit card hurt my credit score?
A. If you miss payments your credit score goes down just as if it were any typical credit card.
Q. How long will it take before I see any benefit to my credit from the secured credit card?
A. Figure a few months for any effect and the longer the better, but make sure you make your payments on time and pay your other bills on time too. If you pay your new secured credit card but default on other bills your credit will not get better.
Q. Do I get some sort of gift points or frequent flier miles for using my secured credit card?
A. No, most secured credit cards do not have associations with those kinds of programs.
Q. Can I use my secured credit card for a cash advance if I need it?
A. In most cases yes, but there may be an extra cash advance fee and the interest rate may be higher.
Q. Can I use my secured card anywhere MasterCard or Visa would be accepted?
A. Yes, as long as you secured card comes with a MasterCard or Visa association with it. Most good secured credit cards come with either a Visa or MasterCard connection just be sure before you apply.
Q. May I use my secured credit card internationally?
A. Yes but international transaction fees may apply.
Q. Sometimes I get asked for a credit card as an additional form of identification, does a secured credit card work for that?
A. Absolutely, no one will know if your credit card is secured or unsecured, it acts exactly like any regular credit card in everyway except it has a connected savings account that only you and the bank know about.
Q. Will I get access to a customer service department 24/7 the way I might with another credit card.
A. Yes, the number should be on the back of the card and on your statements.
Q. Does a secured credit card have the fraud protections of a regular credit card?
A. Yes, zero fraud liability.
Q. Does a secured credit card have automatic insurance when you rent a car like some gold credit cards?
A. No you should make sure you regular personal auto policy cover you when you rent, which most do, or get the coverage from the car rental agency.
Q. I’m about to file a chapter 7 bankruptcy and I know I will have trouble getting a new credit card. I want to keep one of my old cards so I have a credit card of some sort, but I heard a secured credit card might work out better, can you explain that?
A. Let’s say you have a credit card with a $2500 balance and you figure that one card might stay out of the bankruptcy so you can still have a credit card. Over time you will pay that $2500, plus interest likely at a high rate, just so you can have a credit card. When you have your life back together, say in two years, you will have paid around $3000 and have nothing to show for it. If you, let the bankruptcy discharge that $2500 old credit card debt, take that $2500 and get a secured credit card you will have the same ability for buy things at stores and rent cars but in two years when your credit reaches levels where you can get a regular unsecured credit card you tell the secured credit card company you want to close the secured credit card account and you get your $2500 back with interest. Basically the bankruptcy allows you the ability to eliminate all of your debt, you ought to take full advantage of the opportunity and in the end you will have more money in your pocket to spend on yourself instead of giving it to an old creditor.
Q. Are there other options like debit cards and prepaid credit cards that do the same thing?
A. Debit cards or prepaid credit cards will not help rebuild or establish credit in most cases. Read the FAQ on secured credit cards versus the other cards for more information.
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