The Top 14 Questions to Ask Before You Apply for a Secured Credit Card
If you’re in the process of rebuilding your credit, a secured credit card is a good option. You can apply and get approved for one fairly quickly. You should plan to use it for small purchases like Netflix or Hulu. Just remember to pay it off by the due date and your credit will go up. This article will go over the top 14 questions you should ask before you apply for a secured card.
1. What is a Secured Credit Card?
A secured credit card is a credit card that needs a deposit for the line of credit. People with bad or little credit history use them to build good credit. You pay a deposit, and this becomes your credit line. It may be a percentage above the initial deposit, but this depends on the card.
2. Does the Lender Report to all Three Credit Bureaus?
The whole point of getting a secured card is to rebuild bad credit. This becomes pointless if the lender doesn’t report to the three main credit bureaus. Also, make sure you ask the bank if your card uses are getting reported. If you start getting offers in the mail for unsecured cards, you know they’re reporting your usage.
3. Can I Increase My Line of Credit?
Ask your card issuer if you will be eligible for a credit increase after you’ve established a good payment history. Furthermore, you want this credit line increase without a deposit increase. Many secured card companies will do this for you if you request it after a year. However, this may not be an automatic process, and you have to request it.
4. Will There be Extra Charges?
It is essential to shop around when you’re looking for a secured credit card. Once you find one, read all of the fine print. You want a card without a lot of extra fees. Avoid any cards with application fees. The annual costs vary drastically from card to card, and you want the best rate. Some people have gotten a card and watched their deposit disappear before they use the card. This happened because they didn’t know about any additional fees, and it ate into the deposit.
5. Can I Earn Interest with this Card?
Make sure you ask the lender who issued the card if you will earn interest on your deposit. This isn’t common, and it may be a small amount each month, but it is your money they’re holding. Some lenders will pay interest as an incentive to use their card. It is also a sign that they value you as a customer.
6. Can I Have a Copy of the Fee Schedule?
Ask to either see or get a hard copy of your fee schedule. This way you’ll know the fee amount as well as when they’re due. Add the costs up and make sure they’re either at or below the 25 percent range. This includes annual fees, activation fees, and processing fees. The Credit Card Act of 2009 makes it illegal for the costs to go over 25 percent on a secured card. This only applies to the first year you have the card.
7. When is the Bill Sent Out and What is the Due Date?
You don’t want to start out with this card and have missed bill payments. Ask when the bill traditionally goes out, and when you should expect it to show up. Double check that you have the right due date as well. You could be headed for trouble if your bill is due the 28th, but you get paid the 1st. You can ask your lender if they can change your due date to a more convenient day. Not all lenders can do this, but it is worth asking.
8. How do I Get My Deposit Back?
You should only plan to use a secured card for a short period. Ask the lender what you will have to do to get your deposit back when the time comes. You should also ask what happens if the lender goes out of business. You should always plan for the worst, and hope for the best. This includes credit cards and contingency plans.
9. What is the Interest Grace Period?
Some secured cards give you a grace period before interest begins accruing. It is a good idea to skip cards that start charging you interest on your first purchase. You want to be able to pay off your balances without interest as long as possible. Again, it’s a good idea to shop around and read the fine print on any card you choose.
10. How Long Will it Take to Qualify for an Unsecured Card?
How long it takes you up qualify for an unsecured card depends on a few variables. The first is how bad your credit was in the first place. This will dictate how quick it rises with responsible card use. The most important variable is payment history. If you make every payment on time, you should qualify in about a year. Look for credit cards with no annual fees.
11. Can I Get Away with Just Paying the Minimum Payment?
Both secured and unsecured card holders can fall into this trap. You always want to pay more than the minimum payment each month. It’s a good idea to ask if the minimum payment will cover a part of your principal as well. If it’s not, you just paying the interest and not paying the money you owe.
12. Where Can I Get a Secured Credit Card?
You can either research online for a secured card or ask your bank. If you bank at a credit union, ask if they have any you could apply for. Also, if you’re a member there, they’re more likely to waive the annual fees and offer lower interest rates. If they don’t offer one, ask if they can recommend one for you. Learn more about the three best secured credit cards that Credit Fast recomends.
13. How Do I Graduate?
Do a little research on the credit lenders you’re thinking about working with. You’re looking to see if they’ll allow you to graduate to a fair credit card or higher credit line. If they say yes, read the terms for the card you’d be graduating too.
14. Are There Any Problems to Look out For?
There are good and bad secured credit cards. Some cards are looking to extort their customers, and if you’re not careful, this could be you. You want the best terms, and this is where research comes in again.
Capital One® Secured Mastercard®
A secured credit card is an excellent option for rebuilding your credit. If you do your research, you can find a card to rebuild your credit. This will pay off, and you’ll be able to upgrade to an unsecured card. Lastly, if you follow this article and use common sense, you’ll be on your way to a better credit score.
CreditFast has reviewed the best secured credit cards on the market. Some of the credit card offers are from our advertising partners. CreditFast has objectively reviewed the features and benefits of each secured credit card. We have chosen credit card offers based on our editor’s recommendations.