In our last blog “How to Fix Bad Credit”, one of the points that we touched upon was the use of a secured credit card to help you build a good credit history. Since the blog was published we’ve had several inquiries about secured credit card offers and how to get one.
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What is a secured credit card? Secured credit cards require you to leave a deposit with the credit card issuer as a guarantee. The deposit is usually equivalent to the card limit, but it can be higher. The advantage of a secured credit card is that individuals with no credit history or a history of bad credit have the opportunity to build a positive credit history because most companies report regularly to the major credit bureaus. You can use your secured credit card in the same way as you would use any credit card. Be diligent and pay the balance regularly!
What is the difference between a secured credit card and a prepaid credit card? A secured credit card gives you a credit limit. A prepaid credit card works like a debit card; you have to keep reloading it with your own money. In addition, prepaid credit cards don’t give you the chance to build a credit history because no payment information is reported to the major credit bureaus. So, when you receive those secured credit card offers and prepaid credit card offers, you should know the difference between the two.
How do I qualify for a secured credit card? Most people will qualify for a secured credit card because you deposit the funds to secure the card in advance.
Can I get a secure credit card if I’m in bankruptcy or in a consumer proposal? In most cases, a secured credit card Canada is available as soon as are fully discharged from your bankruptcy. If you are in a consumer proposal, once it has been accepted by your creditors, you are eligible to apply for a secured credit card, but not necessarily guaranteed to be accepted.
Are all secured credit cards the same? No, not all secured credit cards are the same. According to the North Shore Advisory Inc., here are some precautions you should take when looking for a secured card:
- Be cautious about secured card offers from unknown institutions. If you have doubts about the integrity of a secured credit card offer, contact FCAC toll-free at 1-866-461-3222.
- Beware of secured card offers from issuers outside Canada. If you have problems, it may be difficult to resolve them if the company is not located in Canada.
- Avoid offers for secured cards that do not have a recognized brand name such as VISA, MasterCard or American Express. These cards may only be accepted at a small number of stores or may require you to make purchases from a specific catalogue.
- Read and make sure you understand all the terms and conditions associated with a secured card before you accept it.
How can I apply for a secured credit card from a reputable and recognized brand? For information on a Home Trust Secured Visa* Card click here.
Contact Ira Smith Trustee & Receiver for more information on secured credit cards and for professional advice on insolvency, bankruptcy and managing debt. You can live a debt free life Starting Over, Starting Now.
