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Some people think they know everything there is to know about secured credit cards. You send in a deposit, you get a credit card. End of story, right? Not necessarily. Before you go jumping into the secured credit card world, there are a few things you should know.
You're Still Going to Pay
Think you're entitled to a lower interest rate just because you're providing a security deposit? If rates of five or six percent are dancing through your head, you'd better think twice. The interest rates of secured credit cards are comparable to unsecured cards, and how much you pay is going to depend on how damaged your credit is.
In fact, some secured credit cards impose processing charges and annual fees in addition to higher interest rates. Before applying for any secured card, compare the rates carefully and know exactly what you'll be charged. Anything in excess of 20 percent interest or a $100 annual fee is generally too much.
Good Behavior Does Pay
Think a secured credit card is just a means to an end? You use it for six to twelve months and then get rid of it? Some of these cards are designed to be that way, but some secured credit cards grow with you.
If you're in need of a secured card, look for one that offers an increasing credit limit with good payment history, or, better yet, one that transitions into an unsecured card over time. Because the length of your creditor relationships has an impact on your credit rating, it's always good to look for cards that you can keep for the long haul.
They're Not Like Prepaid Cards
If you're like many who have considered foregoing a secured card and opting for a prepaid credit card because the initial investment is less, you need to reconsider. Secured credit cards report to the credit bureaus and work to improve your credit rating. Prepaid credit cards do not. In fact, some of the places that accept secured cards will not accept prepaid cards, such as car rental facilities and hotels.
The world of credit cards can be confusing, and there are quite a few preconceived notions regarding the many different types of cards out there. Don't let the rumors you've heard or the misinformation you've been given about secured credit cards lead you astray from making a sound decision as to which card is best for you.
For more tips on secured credit cards, saving money and avoiding getting taken, check out CreditCardWhizKid.com, a website that specializes in providing credit card tips, advice and resources.
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