Can a secured credit card help to repair credit and consolidate debt?
Are you struggling to manage your multiple creditors? If yes, then credit card consolidation is a viable option to eliminate your financial woes. However, when you have bad credit, you may not get a new loan on favorable terms to consolidate your high interest debts. In this situation, a secured credit card can help you consolidate your debts. The interest on this card is affordable when compared with unsecured credit card. If you fail to make timely payments on consolidated debts, then you may further complicate your financial situation.
How can you consolidate your debts with a secured credit card?
When you have a blemished credit record you may not get a personal loan or an unsecured credit card to consolidate your debts. In this situation, a secured credit card is a viable option to consolidate debts. A secured credit card is a prepaid credit card; therefore you’re not required to undergo credit check. You need to provide a security deposit in order to get the equal credit limit on the card. So, the interest on a secured credit card is comparatively lower than other cards. You can transfer your balance to this new card in order to make the monthly payment affordable to pay off.
How secured credit card helps you rebuild your credit report?
The secured credit cards are useful for rebuilding your credit report and show the potential lenders your creditworthiness. You can significantly improve your credit rating when you make payments on time. Therefore, these positive behaviors are reported to the credit bureau by the secured credit card company, and help to repair your credit.
If your credit limit is fairly strong, then your secured credit card may provide many of the same privileges offered by an unsecured credit card.
Are you aware of the benefits of a secured credit card?
Here are a few important advantages of a secured credit card:
- The amount you deposit in the account determines your credit boundary. Therefore, if you deposit high amount in the account, then your credit limit may also increase.
- The deposited money in the account may earn interest and it is compared to a normal savings account.
- As long as you can update your account you can hold the deposit. If you default on your payment, then the balance can be deducted from the amount you have deposited.
- Once you build your credit rating, it can help to increase your credit limit more than your deposit. You can also get back the deposit after a specific time-frame.
- When you use a secured credit card, you can manage to get security and get protection from the Fair Credit Reporting Act.
Therefore, a secured credit card is an excellent option to consolidate your debts as well as repair your credit report. However, you need to determine the pros and cons of this card in order to secure your financial future.