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Financial Planning

What is a secured credit card?

A secured credit card is a credit card that is backed by a cash deposit. The amount can typically range from $300 to $500 dollars. The cash deposit will act as collateral against the money you are borrowing. But wait you say? What kind of financial advice is that? The credit card lenders want me to give them money so I can pay it back with interest? The answer is, “kind of.” If you place the money on deposit and use the card, many will allow you to pay the balance at the end of the month without interest. Secondly, you are not giving them the money. You are only placing it on deposit to back what you are borrowing.

Why would I give them the amount of money I need to borrow?

1.  If your goal is to get a credit card, now you may get one.
2.  Often times carrying plastic is easier and safer than cash.
3.  The credit card company may increase the borrowing amount without requiring more money on deposit based upon your good behavior.
4.  You can build, establish and possibly reestablish your credit by showing that you are capable of maintaining your good financial health.

Does my deposited money earn interest that is on deposit?

It should. The financial interest rates will probably be no better then an average savings account, which in today’s economy is not paying much anyway. You will probably be a lot better off building credit than worry about the interest on a few hundred dollars. Think about it, $300 at .5% interest will only earn you $1.50.

What are the drawbacks of a secured credit card?

1.  You need some money to place as collateral. About the only thing free here is the free advice you are getting at First Financial Help.
2.  You will need to be responsible with this credit card just as you would with any other credit card. If you haven’t read the other credit cards pages yet, bookmark this site and do so. You will hear repeatedly that credit cards are an awesome tool, just like fire. But, used improperly it can burn you also.

Do all credit card companies offer secured credit cards?

No, you have to look a bit to find one, but it is not difficult.

Are there any special things I should consider in selecting a credit card company?

Absolutely, You should not have to pay an unreasonable fee to get a secured credit card. You should not have to buy an insurance policy if your card is backed with your money. There could be some fees, but they should be reasonable. Interest could be 10-18% or it could be 0% as long as you pay off your balance on time.

How will I know if my credit is building?

The most common way is that you will start receiving other credit card offers in the mail. Some may be more secured credit cards, and some may be unsecured. It depends upon how well you are handling this new credit card, as well as any other payments you are making.

Do you have any other free financial advice?

Here is a little more. Use your credit card on a couple small purchases each month that you KNOW and will COMMIT to paying off at the end of each month. It is easy to make a promise to pay back money. They want to actually SEE you do it. Keep in mind it is your money you are borrowing against. Only you can hurt yourself by accident or on purpose.

Get a Secured Credit Card
An overlooked financial help strategy.

A fantastic tool that can be used is a secured credit card. It can help you obtain a credit card with no credit, questionable credit and often times with poor or bad credit.

There are many times we need a credit card. Noticed it said need and not want. That is a big difference. See more at the credit card page for those details. But first let us look at a secured credit card and see how it can fit inside a good financial plan.

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