Most people, who possess a terrible credit rating, tend to have a difficult time when they apply for credit cards. Banks do not prefer to provide credit cards for consumers who have a bad credit rating, because it puts them at a high risk of losing their money. Since bad credit rating signifies that a person has earlier failed to make regular loan payments, many companies get wary of giving credit cards to such applicants. In cases where people manage to get credit cards despite having a bad credit rating, then normally the rates of interest are quite high for such cards. Secured credit cards can be an excellent choice for people who have a bad credit history. Here is a look at the components of secured credit cards which makes it such a lucrative option for people seeking credit cards.

No Probing Of Credit Scores

The credit rating of an individual does not hold any significance, when a person is applying for a secured credit card. The reason credit scores do not have in any relevance in the context of secure credit cards as the card limit is set on the basis of the savings bank account deposit, which is considered as collateral. Even people who do have any credit history can soak in the benefits of secured credit cards.

Credit Limit

The credit limit for secured credit cards is generally around fifty to one hundred percent of the saving bank account deposit. Banks might increase the limit of secured credit card, if the customer continues to make payments on time.

Rate Of Interest

The rate of interest levied on secured credit cards is much lower than that of unsecured credit cards. The presence of collateral in secured credit cards can allow banks to charge lower interest rates, as the risk involved is much lower when compared to unsecured credit cards. A grace period of around twenty five days is provided to the customer to make full payments as per the monthly bill that is produced by the bank.

Revive Credit Scores

One can manage to revive their credit rating with the usage of secured credit cards, as all the transactions done through these cards gets reported to most of the renowned credit rating agencies. In short, if a person fails to make payments on time for secured credit cards then it can have a negative impact on his credit scores. It would be a good idea to pay the monthly bills for secured credit cards on time, so that your credit scores can improve and you can make the most of it in the future, when you are in need of loans.

Shift To Unsecured Credit Cards

Customers, who can make regular payments to their secured credit cards, generally notice a spot on their credit ranking. It has been seen that people with good credit scores that convert their secured credit cards to an unsecured one, within a time frame of twelve to eighteen months after the procurement of the secured credit card.


Mostly it is seen that banks can charge high interest rate for secured credit cards, especially for people who have a bad credit rating. Fees such as annual maintenance and application fees are levied for secured credit cards. Certain banks do not charge any kind of application fee when the secured credit cards are given to the customers. It should be remembered that these miscellaneous charges are not part of the collateral that needs to be deposited with the bank for availing secured credit cards.

In The Event Of Default

In cases where a customer has defaulted on his payments, then the collateral, which lies in the form of the savings bank deposit, gets utilized for the payment of secured credit card dues. One should try their best to make the secured credit cards payments on time, so that their credit scores do not get hampered. One of the major reasons due to which secured credit cards have become so popular is because it gives people the chance to improve their credit rating with ease. Procuring secured credit cards and making regular payments can be an appropriate option who is struggling with bad credit scores.

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