At times, we find ourselves lured by a particular shopping item that we want to buy, but insufficient money puts a stop to our desire. At the flip side however, we often get drowned in debts because of spending money mindlessly. Credit cards where on one hand are little genies and a necessity of today’s life, also are big trouble makers, especially for people who do not keep a track of their expenditures regularly. Once you run into debts owing to a particular credit card you are most likely to get another one to clear up the bills of the previous one. This however, turns into a disastrous process. But a new credit card cannot be granted if you have a poor credit history. Getting a hold of one would have been very hard if it weren’t for secured credit cards.
A credit card that is insured by the card holder’s bank account, usually a deposit account, is called a secured card holder. Secured credit card functions just like your regular account, but offers a lot more ease as you are not required to get your money via bank or ATM. Moreover, you can never run into debt as long as you use this credit card since it allows you to use that amount which you already have deposited.
The limit of using money via your card relies upon the credit you have kept in your account, it normally ranges from 50% to 100% of your lump sum money in the account. For example if you have 20,000 dollars in your account, your credit will range anywhere between 10,000 dollars to 20,000 dollars. However, the precise figure relies largely upon the financial institution you are getting your card from and also on the kind of your card as well. Sometimes you may also find various enticements given to cardholders. The most common is the availability of a higher credit with a very low balance in account; its credit can sometimes be as high as 1,000% of the total balance.
You are required to pay the credits you use regularly for a secured credit card just like you do for an ordinary credit card. In case you find yourself unable to clear up your bills, your account, which is placed as security will be then made use of. This helps you maintain and even improve credit records as you are not negatively reported for the times you fail to pay the whole sum.
Actually, even if you have kept the deposit account as the insurance and the bank has access to it, it is not touched right away. Even if you fail to pay the entire sum for a couple of times, the banks neither takes the amount from your deposits nor does it report you negatively; rather they generally wait till the closure of account and inform you about the debt. The card issuing company normally stands by 5 to 6 months and afterwards your account will be put to a halt however by that time, you may end up having debt amount bigger than your own deposited money. This predominantly is because of the interest charges that your account bears owing to your negligence of not clearing up your monthly bills in time.
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