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Why Secured Cards Are The Hottest Trend In Credit

[Saturday, November 5th, 2016]

Once upon a time, not many people had heard of secured credit cards. And even those who had heard of them weren’t so clear on what exactly they were.

Those days are gone, as secured credit cards are gaining in popularity all the time. They are most popular, in fact, with younger people: Millennials are getting secured cards at an unexpectedly fast pace. The reason? Secured cards are easy to get.

If consumers have limited credit, either because they don’t have a credit history yet, or some event has damaged their credit, one of the best and easiest ways to turn that around is by using a secured credit card. Here’s how they work: with a secured card, the credit issuing bank doesn’t have to worry about the cardholder defaulting on their debt, because during the application, they’ve put down a lump sum deposit that then becomes their credit limit.

But isn’t that just a prepaid card?

The way this works can sound a little bit like a prepaid card or a debit card, where you load the card with money in the beginning, or the card draws from an established checking account. The difference is, with a secured card, the creditor is holding the initial deposit as collateral.

So, say a person puts down a $500 deposit and is given a secured credit card with a limit of $500. They they spend $200 the first month they have the card. When the bill comes the next month, the cardholder owes that $200. It’s not like a prepaid card, in which the $200 would be deducted from the balance. Rather, the bank will hold on to the whole $500 and never apply it to the cardholder’s balance, unless they fail to pay off the debt and are therefore in default on the card.

How it helps people’s credit

The big advantage of a secured card is that the creditor will report the cardmember’s payment behavior to major credit bureaus, allowing them to establish a credit history. This can be difficult to do if you have nonexistent or bad credit, so having a secured card is a helpful step in fixing blemished credit.

For these reasons and more, many people are loving secured cards these days. If you’re in need of some credit help, consider getting one for yourself and getting in on the trend.

See also

Q: Here’s Why Secured Credit Cards Are So Popular Right Now

Over the past several years, secured credit cards have enjoyed a boom in popularity. And yet, some people still don’t know what they are, or how they’re different from other types of credit cards. So what’s the reason behind the newfound status of secured credit cards? First, let’s go over what a secured card actually […]

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Q: 3 Steps To Getting Your Credit Back On Track

Having bad credit can feel like you’re in a sinking ship without a life jacket. It’s a scary feeling, and it can be very isolating. The shame associated with having poor credit doesn’t help; you may feel guilty, and that you’ve done something wrong. But this may not be the case at all. Many people’s credit suffers through no fault of their own.

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Q: The Best Cards for Improving Credit

If your credit has suffered due to a job loss, a divorce, illness, or any other circumstance, you might be wondering whether you’ll ever be approved for a credit card again.

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Q: Two Cards for People Who Can’t Get Credit Cards

If your credit is poor and you find yourself getting turned down for credit cards again and again, you may worry that there is no way you will ever be able to get a credit card. Maybe a divorce, an illness, or unemployment left you with a bad credit rating. Or maybe you are young and don’t have any credit history.

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Q: What Makes a Secured Credit Card Secure

Many people may not be familiar with the term secure credit card. If it’s your first time stumbling on secured credit cards, you may wonder what they are.

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