Secured Credit Card – Everyday Use, Fees And Payments
By Mory Brenner, Esq. of Bankruptcy Alternatives - Debtors Options
Q. In terms of everyday use, like when I go to a store, how would a secured credit card operate any differently from a regular unsecured credit card?
A. It would not, when you would charge something at a store or online or over the phone a secured credit card would act just like a regular credit card because the credit card itself is the same.
Q. What about the billing, would that be the same for a secured card too?
A. Yes, exactly the same and that is something to watch, especially with a high interest secured credit card.
Q. When would there be interest with a secured credit card?
A. If you charged $250 and only pay $100 you will pay finance charges on the other $150 just as you would with a regular credit card. If you don’t make the minimum payment you will pay a late fee.
Q. But since I have the savings account they can just take it from there, can’t they?
A. That is not the way the secured credit card works. The saving account exists for making sure the bank gets paid when you close the account, until than the saving account sits and earns interest at whatever rate saving account earn and you may not withdraw the money and they will not take it in little pieces to pay your ongoing bills.
Q. So in your example even though I have $500 in a savings account I will pay interest on the $150 I can not pay that month.
A. Yes, exactly, just as if you had a savings account at a bank and unrelated to that savings account you decided to take a personal loan for $150. You pay interest and fees on the loan or credit card and you get interest on the saving account and they remain separate.
Q. Than as long as I pay my secured credit card bill in full every month I pay no interest?
A. You refer to the standard 30 day grace period common with unsecured credit cards. Some secured credit card may come with this feature as well, but read the fine print as many of these cards offer no grace period at all. That means you owe interest from the day you make the charge until the day the bank gets your payment. For these secured credit cards the interest rate becomes an even more important concideration.
Q. What about other fees with a secured credit card?
A. In general the types of fees one might expect would come out as the same list you might find with a regular unsecured credit card like overlimit fees, cash advance fees and foreign transaction fees.
Q. Are there any extra fees I would only pay because I had a secured credit card as opposed to an unsecured credit card?
A. No, you need to look at the particular card to see if the fees might be higher or lower with your specific card, but secured credit card themselves or the use of secured credit cards come with no fees just because they happen to be secured credit cards instead of unsecured credit cards.
Q. When I pay the card to I send it to the savings account or the bank?
A. You pay the bank just as if it were an unsecured credit card.
Q. How can I pay the bank?
A. You can send a check. In some cases you may be offered a choice to pay by phone or have payments drawn from your account via and ACH transfer. Just may sure you learn if you will incur any fees for non-check payments.
Q. At what point if I get late will they take the money from my savings to pay my secured credit card?
A. When either you or the bank close the secured credit card account.
Q. Will anyone know my card is a secured credit card?
A. No. Neither the shop or restaurant nor any friend or customer who might be with you and see the card would know by looking at the card it was a secured credit card. It will look just like an unsecured credit card. Any business who took the card for payment would not know from any part of the transaction either. Only you and the bank who issued the secured credit card would know unless you tell someone.
Q. Do I get fraud protection with a secured credit card like I would with an unsecured credit card?
A. Yes. Read more about the in the Secured Credit Card vs. Unsecured Credit Card FAQ.
Q. Does my card or my savings expire?
A. No. You do not have to use the card or lose your savings account money. The card itself will have an expiration date, but if your account remains in good standing they will just send you a new card before the current one expires.
Q. Do I have the right to dispute something on my bill or ask for a chargeback?
A. Yes if something is wrong with a billing item, just like an unsecured credit card.
Q. If I lose the secured credit card do I lose my savings?
A. No, report the card missing or stolen and the bank issues you a new secured credit card while your savings remains safe.
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