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Reconstructing Credit History with Secured Credit Cards

Secured credit cards are different from regular credit cards in terms of approval and collateral. In applying for a secured credit card, you will need to make an initial deposit which is specifically for the card you are applying for.

If you had financial woes in the past which affected your payments with all your old credit cards, do not lose hope. Even if you have attended debt management programs and other programs to aid you in the predicament that you are in, there is still a chance to rebuild your credit standing. If you are one of those people suffering from a bad credit history, all you have to do is apply for a secured credit card.

After you have made a deposit for your secured credit card, the bank or organization which you are applying for determines the credit limit of your card. Credit limits range from 50% up to 100% of your deposit. The interest rates that are charged by these secured credit cards are almost always higher than that of the regular card. So even if these cards are a great option in rebuilding a credit history, care must be exercised.

You should never charge more than you can pay once you have acquired a secured credit card. The reason is that your credit limit would likely be lower than that of what you have deposited for your own good. An advantage of this is that whatever the remainder of your deposit, the bank pays for its interest, net of withholding taxes.

After you have successfully applied for a secured credit card, you should check your credit history by getting access to your credit report. Credit reports are usually issued annually, and there you can see if you are making progress. Some people who are in bad credit standing acquire an auto loan or any other type of loan just to boost their credit score.

Some of the things you need to consider when choosing a secured credit card is the APR or the Annual Percentage Rate, which determines the interest percentage you have to pay each month every time you make a purchase. The lower the APR you get, the better.

Another thing that you need to consider is the grace period. In choosing a card, you have to select the one with a longer grace period, meaning more days. Grace period is the time or the number of days that is given to you by the bank to pay your credit card without incurring any interest.

Finally, the annual fee, which is the fee paid by car holders in exchange for the benefit given to you by the bank to carry and use their credit card. It is best to choose a credit card with the lowest annual fee, or those which are free. There are a lot of banks out there nowadays that does not charge their customers for annual fees.

There are a lot of thing that you need to know, and at the same time need to consider when reconstructing your credit history through the acquisition of a secured credit card. But once you have rebuilt your credit standing and eventually get qualified for unsecured loans and cards, you will find that every hardship is worth it.