Are you looking for a credit solution because you’re suffering financially? We Got You!

Finance experts spend their lifetime guiding people to use a credit card wisely. 

Still, somehow, most of us end up with huge credit debts that affect our credit score and our credit life.

The best part? Despite your bad situation, you still want to get approved for a good credit card. 

The worst thing about it? You need good credit history to build credit like a pro. 

But then again, you require the right credit card to build your credit history in the first place. Argh!! Why is it so confusing and complicated? You must be thinking, right?

We are here to help!

So let’s deny the “Good credit cards aren’t for newbies” concept with us.

1. What Is A Secured Credit Card?

A heaven for people with no credit history or poor score, a secured credit card is a new norm. Backed up by a security deposit, it allows the consumer to get approved for the card without a solid credit background. 

Jordan Tarver at Forbes says: What more can you need from a credit card other than getting approved for it instantly, even with a bad score?

Yeah, yeah, lots of rewards, bonus points, freebies, and so much more. Have patience, fellows; we’ll get into all of it later in our guide. 

“A secured credit card demands a cash deposit at the time of account opening.”

Secured Card Vs. Unsecured Card

Bonus: Click to find a thorough comparison of secured and unsecured credit cards. Choose what works best for you!

2. How Does A Secured Credit Card Work?

Image Credits: Freepik

As we explained earlier, it requires the consumer to submit security (can be used as collateral later) before opening the secured account.

The deposit works as evidence of your credibility, portraying your application as ‘safe’ and ‘not risky’ to the credit card company.

This cash is further used if you fail to pay your bill timely. Hence, a better card option for bad credit scorers. Here’s how it works:

• You paid $350 as your cash deposit, and then it’s most likely to become your credit limit
• The deposit works as debt security to the card issuer
• One or two late payments increase the interest rate
• If you miss a payment, the bill will be deducted from the security,

However, you might get the deposit back by paying your balance in full. The final say will be of your credit card company.

3. How Is A Secure Credit Card Better Than Other cards? 

Whether you aim for a good credit score in Canada, America, England, or wherever you’re residing, you’ll always find a secured credit card on the ‘improve credit score and financial stability’ guides.

What could the reason be? Why is it so hyped up that every finance expert advises getting it for better financial planning?

Here are some reasons to prove the point:

• Almost everyone can get approved for a secured credit card. In comparison, for other top-notch cards, one may have to work on perfect credit history and an excellent credit score to get a card with low interest.
• You can often build and check credit score to review the improvements using a secured card without changing much of your lifestyle. In comparison, it may take a while to see the changes with a traditional card.
• A secured credit card (for a poor score) may provide better interest rates and insurance discounts without putting too much into the credit deposit. In comparison, you must have a good history and score with a regular card to land an affordable interest and insurance rate. 

Expert Tip: Jasmin Suknanan explains that using credit cards can help you improve your financial condition with time, but only if you use them wisely.

4. Why Experts Prefer Secured Credit Cards? 

Image Credits: Freepik

We have been going on this for a minute now about why finance experts and top advisors advise getting secured credit cards.

However, if you’re still not convinced, we have got more convincing reasons in the room for you. :p

# Increased Chances Of Qualifying For A Loan

Secured credit cards don’t demand a high credit score and thus have a better chance of approval. So, when your application gets approved, you now have an opportunity to improve your credit score. 

This eventually gives you a better ground to apply for a loan that can see you can maintain your card and credit history.

# Better Odds Of Security Clearance With Employers

Some employers do a background check of credit score to ensure you’re secure enough and won’t need money for debt clearance. 

However, they will need written consent from you. And, as a secured credit card is easy to manage compared to other cards, it can help you clear the ground. 

# Affordable Insurance & Auto Premium Rates

With a chance to improve your credit score and balance your earnings or spending, you automatically make yourself eligible for a better premium rate.

Don’t believe it? 

Visit a mortgage lender or insurance company and ask for the rates.

Get a secured credit card if you’re a student or a young adult with no credit history. Use it for six months or a year to build credit history. Then, apply for an auto, home, or insurance loan, and see the difference you’ll get in the premium rates. Thanks, us later!

# Improved Quality Of Life; Happy & Contented

If you find it hard to save or budget, try using a secured credit card. Put your small bills like Netflix, grocery, clothing, or utility bills on this card and make an effort to pay the balance in full every month.

It will give you a morale boost that, yes, you can do it!

M&T Bank researchers analyzed that you can get the best of both worlds (secured and unsecured) by using a secured credit card, the rewards, discount offers, travel miles, etc.

So, why risk your financial stability with something else?

5. Can A Secured Credit Card Raise Your Credit Score?

Yes! Yes! Yes!

Most secured credit card companies forward the consumer credit report to the credit bureaus (Equifax, Transunion, Experian), thus giving you a chance to improve your credit score.

As your timely payments and cleared bills will show up well on your credit history, make sure you adopt good spending habits with your secured credit card.

Some of the top habits explained by Mentalfloss are:

• Turn on your auto-transfer to save money instinctively 
• Make a list of things you need before purchasing
• Find cheap alternatives for the things that aren’t necessary, still, you want them anyway
• Budget weekly or monthly and make sure to review the progress now, and them
• Open a separate credit account just to save money for emergencies
• Set aside the extra money you earn. For example, any bonus, tip, or freelancing money

Put all your coins or small bills in a jar or piggy bank to find a surprise at the end of the month.

6. How To Use A Secured Credit Card With A $300 Limit?

As your credit limit is directly proportional to your credit utilization ratio, you must not use all of it. The simple rule to follow is:

• You must not exceed 30% of your credit limit if you want to build a good credit score
• You must not exceed 10% of your credit limit if you want to rebuild your credit score

Of course, you can apply to increase your limit later on, but for the starter, you must maintain the credit utilization ratio.

Here’s how you can efficiently use a secured credit card with a $300 limit:

• Put small subscription bills on the card 
• Pay your food with the secured card ($5 or $10)
• Use the card to put gas in your vehicle

The goal is to use it intelligently to build score while remaining in that 10% to 30% ratio zone.

Bottom Line

Experts advise getting a secured credit card because of the guaranteed approval even with a bad credit score and no credit history. 

Yes, qualifying for a high reward, low-interest rate, and endless bonus credit card is too demanding, but what if we say you can have all of it with a secured credit card? Ah, a dream come true!

It gives students, immigrants, youngsters, and financially struggling adults a chance to do something for their future. 

So, what’re you waiting for? Take the initiative now to turn things around for you!

Lastly, if you want to read more such helpful and comprehensive guides, give the Plastk Blog section a read.

Let’s walk your road to financial literacy together!