You can build your credit by owning a secured credit card. This has made building credit easy for people who are in a hurry to get a credit card of their own. This particular method is useful to people who are building their credit from scratch. How does this work? To have a secured credit card, you have to make a certain deposit which is usually the credit limit. This deposit can be looked upon as collateral for people who use up their credit limit and refuse to make payments. The credit card issuer can decide to use the initial deposited amount to cover up for the defaulted amount. The essence of the secured credit card is for you to establish your credit history; this then helps you to build your credit and allows for an easier issuing of your unsecured credit card when you need it. The secured credit card is more like a trusted tool used by card issuers to monitor and help you build your credit so that they can ascertain if they can end up trusting you till the extent of finally issuing you an unsecured credit card.
ADVANTAGES
a. One advantage this method has is the reason it was created in the first place, which is to help you build your credit score. It then qualifies you for getting for yourself the usual unsecured credit card but to achieve this; you have to endeavor to pay up your bills at the allotted time and ensure that your balance is low most of the time.
b. This method helps to control your spending’s. With the lower limits that comes with this card, you are involuntarily forced to watch your spending’s which is an added advantage to the cardholders
c. Interestingly you can earn interests with a secured credit card on the basis that you adhere to the rules, you are guaranteed an interest whenever you get your deposit back or whenever you upgrade to an unsecured credit card.
DISADVANTAGES
a. This card can never come with the full benefits of an unsecured credit card such as annual fees, reasonable penalties, monthly processing fees, etc. This method comes with a ridiculously high interest rate. For a secured credit card, if your balance is not paid off in full at the end of every month. Your lender charges interest on the remaining amount and this will continue to add up every month till that balance is paid off.