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A secured credit card is a type of credit card that requires a cash deposit as collateral. The deposit acts as a guarantee that the credit card issuer will be repaid, even if the cardholder is unable to make their payments. Secured credit cards are an excellent option for people with no credit or bad credit because they are easier to qualify for than unsecured credit cards.
Here are some benefits of a secured credit card and how it can help build your credit score:
Easier to qualify for: Because a secured credit card requires a cash deposit, credit card issuers are more likely to approve your application, even if you have no credit or bad credit.
Helps build credit: Your credit card issuer will report your payment activity to the credit bureaus, so making on-time payments can help to improve your credit score over time.
Offers a low credit limit: Secured credit cards often have low credit limits, which can be helpful for people who are new to credit or who have struggled with managing credit in the past.
Gradually improves credit limit: If you consistently make on-time payments and manage your account responsibly, some card issuers may offer to increase your credit limit.
Rebuild credit after negative event: Secured credit cards can also be used to help rebuild credit after a negative event such as bankruptcy.
Conversion to Unsecured Card: After a period of time, some card issuer may convert your secured credit card to unsecured card based on your consistent on-time payment, responsible management of account, and improved credit score. In summary, a secured credit card is a great option for people with no credit or bad credit because it is easier to qualify for and can help to build credit over time. By making on-time payments, managing the account responsibly and gradually improving the credit limit, it can help in rebuilding or establishing credit.