The utilisation of credit cards is quite tricky for many as these can make or break one’s credit. Consumers need to choose the best card apart from maintaining a few other disciplines to have the maximum advantages.
However, the wide variety of cards offered by the issuers can be puzzling. For instance, those who are already drowned in considerable debt often contemplate taking a new credit card. Several card issuers offer secured credit cards to do away with such shortcomings.
Some issuers also provide tailor-made pre-approved offers on these cards as well as on personal loans, home loans, business loans and other variants of financial products & services. This particular feature helps in saving ample time for the applicants with its simplified steps. You can check your pre-approved offer online by submitting a few necessary pieces of information.
So, getting a secured credit card is not much of a trouble with such facilities. However, obtaining and using a secured card is still a little-known practice. Perhaps, a number of users are currently deprived of this privilege owing to their lack of knowledge.
360-degree guideline of secured credit cards
The secured credit cards are an exclusive financial tool designed for those who want to build or re-establish their credit score by:
- Building a better credit history
- Improving credit health over time
But, these types of cards need securities as collateral. So, borrowers have to pledge their Fixed Deposits to get approval from lenders. The card issuers will refund the money at the time of account closure, provided borrowers clear all their bills timely.
Hence, a secured credit card can be better than an unsecured one in certain circumstances. These secured cards make up less than 1% of the card market as consumers are usually unaware of their usage and functional advantages.
How does a secured card work?
Secured credit cards work just like the insecure ones. The credit limit for such cards can be as much as 85% of the deposited amount, precisely why a secured card can come in handy to enhance the financial portfolio. However, cardholders must learn how to use a credit card properly if they want to make the best of its intrinsic benefits. Here are some hand-picked tips for the users:
- Cardholders must utilise a small portion of the available credit because a low credit utilisation ratio helps to build a sound CIBIL score.
- They also need to make timely payments each month and in full. Not to forget, payment history greatly influences the score.
- Payment defaults should be strictly avoided with such secured cards, considering that there is an asset involved.
Secured cards can be a highly beneficial financial solution for users if they conform to these pointers.
However, it is always important to pay heed to certain aspects before venturing forward. Following are the few things an applicant should consider before applying for a secured card:
- A borrower must go through all the preliminary work on fees, annual charges and other associated charges.
- Secondly, he needs to look for a lender with whom he can earn interest on the security money.
- Additionally, the users should have a pre-decided budget in mind while considering their current financial health. Secured cards with lower deposits are easier to obtain and vice versa.
- The interest rate is another deciding factor. So, an applicant must find a lender offering the most competitive interest rates.
Who is eligible to apply?
Individuals who can afford to provide an asset as collateral are easily eligible for this product. Both self-employed and salaried applicants need to have a monthly income that is higher than the minimum cap set by top financial institutions. They also ensure that the process of application & approval is universally convenient irrespective of the borrowers’ credentials and requirements.
So, if you are still worried that your poor credit score may lead to the rejection of your credit card application, do your research and opt for a secured card at the earliest.
Additionally, you can also check out credit cards like the Bajaj Finserv RBL Bank SuperCard that comes with several industry-first benefits.