Credit card loans always relate to unsecured loans by default. That’s what most of us are used to hearing. However, there can be circumstances when credit card loan can be a secured one too. The basic distinction between secured and unsecured loan is that there is a lien or an asset attached as collateral for the lender to capitalize in order to recover the debt. This holds good only if the debtor defaults or misses payments due consistently. To learn more about loans, bankruptcy, and other financial information, log on to Recovery Law Group, the encyclopedia to address all your financial questions!
What is a secured credit card?
A secured credit card is usually offered in exchange for a deposit in the credit union or a bank. This credit offered usually attracts a lower rate of interest. The percentage of credit extended based on the deposit varies from scenario to scenario and person to person. A few people might only be able to access 50% of the deposit while others can access 120% of the same. Credit score, previous history, amount of deposit, etc., are some factors which a bank or a credit union considers before determining an appropriate percentage. The deposit account isn’t allowed any activity while the credit card is in use. The deposit account is basically frozen. Once the credit card is surrendered, the account is released. In this scenario, the deposit account acts as collateral and makes the credit card issued a secured one.
Why opt for a secured credit card?
Considering it is a secured loan and not a very justifiable solution, it is worthy to understand why people would like to opt for such a credit card. Most people use this as a last resort as they are unable to qualify for an unsecured one. This card is also secured by people who are not eligible due to their poor credit score and want to improve the same by improving their payment history. Secured credit cards are also a lucrative way of increasing the credit card limit slowly. However, there are many flaws in this type of cards too. Higher application fee, annual charges, maintenance fees, and other fees, make this type of card an expensive affair.
The interest rates are high, you don’t even get grace period for repayment too. So, this is not a great alternative for sourcing funds for sure. If you are planning to get one for yourself in order to secure a better credit score it is worthy to ask your credit card company if they report to any of the three national reporting agencies or not. If they don’t, all your hard work to enhance the credit score could just go to vain. If you are not getting one and this is the only option, you are then out of options and there is no choice. However, you have a choice with respect to some of the best financial experts to address, solve and help with all your questions and concerns. Dial in +1 888-297-6203 now!