By Ryan Levin on December 17, 2011
.jpg.aspx) Despite the fact that many people misuse credit cards and fall into huge debt because of it, credit cards can actually be useful when used appropriately. They’re more convenient than cash, and they can help you establish or rebuild your credit history, which will be invaluable when it comes time to take out a home or auto loan later on. If you don’t have a credit history yet, though, or if you’ve been unreliable in the past, it can be a challenge just to find credit cards.
If you’re looking to establish or re-establish a credit history, the best option is probably a secured credit card. With a secured credit card, you make a deposit with the card-issuing organization, usually of a few hundred dollars. Then, you treat the card just like a normal credit card, with a credit limit equal to your deposit. The reason it’s called a secured card is that if you start missing payment or you go over your credit limit, the card issuer can simply keep your deposit, so there’s no risk to the company—they’re secured against default. That’s good for you, too, because it means you’re much less likely to get into legal trouble if you fall behind on payments. Secured credit card issuers will give you your deposit back after a certain amount of time, or when you close your account.
A great place to start can be your bank or credit union. Banks will rarely deny their customers the opportunity to build credit using their own card, so ask the next time you go to make a deposit. Lots of banks charge an annual fee for a secured credit card, though, or have few options as far as rewards, so you might be interested in looking elsewhere as well.
The Internet has lots of resources to help you find credit cards that work for your situation, including cards tailored towards students, towards those with bad credit history, and toward those who only recently arrived in the country.1 Most secured credit cards have high interest rates, but there is some variation, and you might even be able to find one without an annual fee.
Don’t forget, though, you still need to be approved for the more favorable credit cards, even if they are secured—and if your history is that bad (or nonexistant) you might end up back at your bank anyway.
After you’ve maintained a secured account for six months to a year, you should start getting offers from other credit card companies in the mail; that means your credit score is on the rise, and from here on, it should be easy to find credit cards that suit your needs.
References:
1www.creditcards.com |