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Secured Credit Cards and Their Benefits

Secured Credit Cards and Their Benefits

A secured credit card works by the customer topping up their account with a cash sum, and then the credit limit of that account is the amount that the customer has paid in. This is almost the opposite of a normal credit card, where the customer pays with their credit card for transaction, and then pays off the balance on the card after they have used the credit on the card.  With secured credit cards, the customer pays for the credit before they begin to make transactions.

By having a secured credit card, the balance on the card is already paid up front before you begin to make transactions.  Rather than having to worry about whether you will be able to afford the repayment each month, you have already paid off the money on the card, so this will not be an issue.  As you will effectively be making all of the payments before using the card, you will always meet your repayments for each month.  This means that you will be able to build your credit rating up quickly.  If you have had bad credit rating in the past, your credit score will be able to be improved upon substantially which will make you a trust worthier customer for other credit lenders.  With an improved credit rating, you can get loans and mortgages much more easily than you could do if you have a bad credit rating.

You should be careful of the fees imposed by the credit card company.  Usually they are not too bad, but if you look at many different secured credit card companies, you will be able to find the one with the lowest rates, which will mean that you get the most out of your money.

If you top up your secured card regularly, and are a good customer you may find that your secured credit card supplier offers you incentives to keep using your card.  These may be in the form of money back schemes, free gifts to be won when you buy using your credit card and even an increase of your credit limit to use as an overdraft of the payment that you have already made. 

If you are a credit card user who has bad credit rating and requires a credit card, then you will benefit from getting a secured credit card, as you can not only have a convenient way to make transactions, but you can also repair your credit report score.

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Avoid cash advances. Interest-free periods offered on credit card accounts do NOT apply to cash advances. In most cases, you will pay interest on that cash right from the time you withdraw it. ANZ and Westpac cardholders pay a bigger penalty - not just immediate interest but also a fee of 1.5 per cent of the withdrawal. That's $15 straight off on a $1000 credit card cash advance. And some card providers are now charging a higher interest rate on cash advances than on purchases up to a whopping 27 per cent.

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