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Credit Cards for Building Credit

Many people get caught up in overusing their credit cards and amassing a large amount of debt. They continue to charge things that they can't afford to pay off when their monthly bills arrive. Consequently, their credit score suffers. When this happens, their credit rating no longer qualifies them for an unsecured credit card. Secured credit cards are credit cards for building credit for those with very bad credit. Although secured credit cards are an option for most people, issuers usually do not approve individuals that have outstanding liens on their property, are filing for bankruptcy or have been convicted of credit card fraud.

Secured credit cards are also a great option for someone with no credit who is just starting out. Many parents use secured credit cards as a way to teach teenagers and college students about responsible financial spending.

What is a Secured Credit Card

A secured credit card is a credit card that is secured by funds deposited to the company that issues the secured credit card. The money functions as cash collateral against a user defaulting on their payments. The money is usually deposited into a savings account that earns interest. The deposit amount varies from card to card, but generally minimum amounts rage from $250-$500. Credit limits are established by the amount held in the savings account. Sometimes the limit will be for the full deposit amount and other times it will be a percentage of the total.

Comparison Shop

It is imperative that you comparison shop for the right secured credit card and get one that fits your financial lifestyle. It is important when looking for credit cards for building credit that you find a card from a reputable company like MasterCard or Visa. Some third party cards will not be acceptable at major retailers. You should take into consideration factors like application and annual fees, finance charges, accrued interest on the deposit as well as the available line of credit.

When selecting a secured credit card look for the following:

Cards with low fees

Almost all secured credit cards have fees. Look for one that only charges a annual fee and does not require a monthly maintance fee. Compare different offers and look for the one with the lowest fees.

Cards with low APR

The APR, or annual percentage rate, is the interest rate applied to balances that you carry beyond the grace period. Look for a secured credit card with the lowest possible APR. The best unsecured card should offer a decent APR that continues through the life of the card and is not some teaser rate of 0 percent APR that increases after 6 months to 1 year.

Cards that build credit

The best secured credit cards to have are the ones that report monthly to the three major credit bureaus. You credit score will increase with the reporting of a positive payment history. The longer you are financially responsible in paying your balances each month you will start to see your very bad credit improve. If the card issuer doesn't report to a bureau, these are not good credit cards for building credit.

Cards That Become Unsecured Credit Cards

The best secured credit cards allow you to convert to an unsecured card after a period of timely payments.

A secured credit card is a short-term fix to repair credit. A secured credit card must be used responsibly in order to fix credit and get a high credit score.

  • Make small purchases that you can pay off every month, this creates a positive payment history.
  • Pay on time every month.
  • Make regular purchases. Not using a card will result in the credit card company cancelling the card.
  • Monitor credit scores and apply for an unsecured credit card as soon as eligible

After you build credit, it is essential to monitor your credit report on an ongoing basis. You are entitle to request a free copy of your credit report once every 12 months from each of the nationwide consumer reporting companies, Equifax, Experian, and TransUnion. The law does not require the bureaus to give provide a credit score.

Learn more with the Complete System to Repair Your Credit and Boost Your Credit Score. Download Today!