Secured card is nothing but a credit card which is linked to any kind of savings account and is used mainly as something collateral on available credit with that card. With the card backing the money is either held or deposited in the respective account. The account will already deposited money and the credit history are what the limit is based on. The limit being the deposit’s percent varies from fifty percent to hundred percent.
It not only helps in building any credit but also helps in application of any kind of credit cards of regular types in future. Also it helps any person to once again build his or her credit score who had a poor score regarding credit or a not so good history of credit. Banks are often seen increasing the limit of the credits of an individual where the repayment behaviour is good and also where there is no collateral additional deposits. This increase in the credit limit also helps in the increase of the overall score of the credit.
Collateral money deposition is essential otherwise the bank will be at risk. This money is used as compensation by the bank in case of any kind of loss of money when the dues are not cleared by the individuals.
It is one of the fastest and easiest ways to apply for these Secured credit cards as no additional inquiry is required for these by the banks. What is checked is only the credit score. Formalities such as documentation, deposition of the collateral money and some other few requirements are to be done in the process of the application.
There are some important factors that are to be known to all. They are:
Features of the card
- Benefits- Each bank offers different benefit for each different individual. So before making the card one must choose carefully after getting a clear notion of which card is offering more benefit.
- Credit limit- At the beginning somewhat modest limit of credit will help in managing the credit. On the other hand increasing the limit slowly will be beneficial.
- Eligibility- Different banks offer different kind of eligibility criteria for opening the card. Few banks require deposited money of minimum amount in the bank account while others may need fixed deposit money with the respective bank.
- Approval processes for making this card is considerably easy as the bank while taking the collateral deposited money is not in any risk.
- Additional credit history inquiries are not required making application for this card easier.
- Reporting of the repayment behaviour and credit limit are always being done and updated by the banks paving the ways for increasing the limit and thus the credit score.
- Few banks also offer both savings account with interest and interest on the money deposited for security. Both are beneficial on the part of the card holder.
Today many banks are offering these Secured credit cards but it must be only made from a bank if the bank is reputed as well as provides the desired benefits to the applier.