The Truth about Secured Credit Cards

A secured credit card is a credit card that is that is tied to a monetary fund of some kind (whether it is a deposit, bank account, or some other account). The monetary fund can be accessed and used by the credit card company in the event that the credit card holder defaults on a payment. These kinds of credit cards usually have an obscenely high interest rate and an inordinate amount of fees. Basically, they are terrible credit cards that target people with bad credit.

First and foremost, never get a secured credit card unless you absolutely have no other choice at all. In fact, even if you have no other choice, you should again analyze whether you should get a secured credit card. As I stated, secured credit cards have terrible interest rate and a vast amount of fees (including an annual fee, program activation fee, deposit fee, etc), therefore, they are bad credit cards to own. However, they are attractive options for people with bad credit because the requirements to get a secured credit card are very easy to meet.

As an alternative to getting a secured credit card, you should look at non-major credit cards. These types of credit cards include credit cards from various retail stores, department stores, and even gasoline cards. These cards usually have a high interest rate, however, the usually have no fees attached to them as secured credit cards do. Additionally, these “non-major” credit cards are unsecured, therefore, you do not have to put up a big deposit or tie the credit card to a bank account. It is easy to qualify for non-major credit cards, and thus, they provide an attractive alternative to secured credit cards.

Secured credit cards can help restore your bad credit, however, they come with a heavy cost. It might actually be cheaper to dispute negative information on your credit report. If some of the negative information gets removed, your credit score will increase, and therefore, you will have a better chance to qualify for an unsecured credit card.

The point is, if you have a choice, do not get a secured credit card. If you do not have a choice, make sure that you seriously consider whether or not obtaining a secured credit card is worth the potential credit score benefit.

How to Get a Lower Interest Rate on Your Credit Card

A lower interest rate is a great asset to have. The most noticeable benefit is that you can save a lot of money on interest charges. However, you can also use that credit account as a bargaining chip with other credit companies. You can use the time tested “can you beat this offer” routine. Thus, the question is, how do you get a low interest card?

First and foremost, if your credit score and credit report qualify, you can apply for a low interest card. This is the easiest and most obvious way to obtain a low interest credit card. However, this method is only the easiest and most obvious if you have the credit score and credit report to allow you to get such a card. If you do not have the best credit score or report, there are some tactics you could use to lower an interest rate.

If you already have a credit card and your record with that card is flawless, you can call the credit company and request a lower interest rate. You have to be firm and you have to make a credible request. As a general rule, credit card companies want to collect at least between 8-10% interest on credit balances. Of course credit companies love when you pay more, thus, they never tell you that you can get a lower interest rate than the one originally given.

Anyway, back to the credible request. If your interest rate is 18%, asking for a 6% interest rate is just a waste of time. Even if your credit was flawless, no credit card company would drop your interest rate 12 points at one time. It is more realistic that your rate would end up somewhere between 13-15% based upon your relationship and history with the credit company and on your credit score and credit report.

The bottom line is, your options are limited unless you have a good credit score and credit report. Therefore, if your score and report are less than par, you are going to have to deal with your current credit account companies in order to get a lower interest rate. The worst thing that can happen is that your credit card company will not lower your interest rate. The best thing that can happen is that the company will lower your interest rate, therefore, why not give it a try? Just remember to keep it credible, but stay firm with your request and bring up your great history with the company from which you are trying to get a lower rate if the company seems reluctant.

Cash or Credit - Which Should You Use?

As a general rule, you should never buy something with a credit card unless you have the money to pay off the charge. Many people like to buy things on credit (even though they cannot normally afford the item) with the intention that they will pay off the purchase in the long term. This is a mistake because you will end up paying more in interest than you would have had you paid cash.

Another way to use a credit card is as a rewards point builder. First and most obviously, you must have a rewards credit card for this to work. The process is very easy from here. All you do is use your credit card to make specific purchases throughout the billing period. When your bill becomes due, you pay off the entire amount. Obviously, you have to have the money available to pay off the entire monthly amount. Additionally, you must keep very accurate records of your charges in order to ensure that you have enough money on hand to pay off the monthly balance in full. The whole purpose is to build reward points without paying interest on your charges. Keeping accurate records and charging only specific purchases will help you accomplish this goal.

Most people are surprised when they get their monthly bill because they do not realize how much they have spent on food and gasoline. These charges can add up fast. If you are responsible with your credit and keep accurate records, this should not be a problem. How do you know if you are a responsible credit user? Let me put it this way; if you have to ponder whether or not you are a responsible credit user, chances are that you are not. This does not mean that you cannot utilize the rewards points strategy; all this means is that you probably should not purchase food or gas on credit because there is a chance you will charge more than you can afford. If this is the case, you should use cash (or a debit card) for food and gasoline purchases.

Basically, everything comes down to responsibility. If you are responsible, you could use cash and credit interchangeably without worry of getting in over your head. However, responsible or not, always keep accurate records of your credit so that you do not lose track of your spending.