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Advantages and Disadvantages of Secured Credit Cards

Advantages and Disadvantages of Secured Credit Cards

As with any payment means, there are a few advantages and disadvantages in using a secured credit card. Here is list to follow:
Advantages
Functions as a credit builder: A secured credit card’s principal motive is to help those who want to begin their credit history
Functions as a credit re-builder: Alike to the way it assists the beginners to start their credit journey; these credit cards also help individuals with poor credit histories get back on track.
Reporting to credit bureaus: Your activities such as purchase, payment, and others are reported to credit bureaus, just as it would with an unsecured card. Good practices are appraised with good credit scores (do not forget, the opposite is true too).
Multiple useful pros: Several secured cards feature benefits much like an unsecured card such as mobile protection, credit monitoring, caution with theft alerts and travel insurance.
The prospect to upscale to an unsecured card: Use a secured card often and correctly, this will make a pathway to gain an unsecured card. Some providers offer this in as less as eight months.
Disadvantages
The security deposit: The key feature of a secured card is also its major downside. For many individuals that need the use of a secured card, generating a deposit to get the card is not at all times easy.
The low credit limit: Although a secured card’s main purpose is to slowly build credit, the low credit limits — in some instances can be highly limiting.
Fees and interest rates can be high: For an individual struggling to create or rebuild credit, any additional fees can be a burden. Due to the possibility involved for the provider, interest rates are on a higher side when compared that of a regular credit card. Many secured cards also charge high annual fees, and administrative or operational fees.
No Reward Program: There is a limited or no scope for reward points for the secured card users.
Not all issuers allow you to upgrade: Closing a secured card soon or without the backing of the provider to graduate to an unsecured card may affect your credit history.


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