What is a secured credit card
If you have a bad credit history or a weak CIBIL score or an extremely short credit history, but still want this credit card then you can opt for a secured credit card. Hence essentially if you want credit cards without credit score you should get an unsecured credit card. These credit cards as opposed to prepaid credit cards are backed by payment or a deposit. This payment serves as collateral which compensates for the unfortunate credit score. This is one of the major initiatives by banks and financial institutions targeted towards helping customers by allowing them to rebuild their credit profiles. The only stipulation for getting this credit card is that you must have a certain amount of money deposited in the bank which serves as the credit card limit.
How is it different from a prepaid credit card
Prepaid credit cards are the first choice for people with good credit history.
In a prepaid credit card, you don’t have to keep any amount of money as collateral. Since it is prepaid it comes with a credit limit inherently. This limit is set by the bank and it depends on several factors. Some such factors include the credit report of the customer, the payment history ability to pay back on time, and most important of all the credit score.
While the prepaid credit card offers major benefits it also comes with a higher rate of interest than the secured credit card. Additionally, the annual joining fee of prepaid credit cards is higher than that of secured credit cards.
Steps for getting a secured credit card
The application process for a secured credit card is almost the same as that for an unsecured one. However, it is much simpler and involves a lot of use and fewer steps from the bank’s end. They merely check the credit score on your credit report and issue the card. There are no further inquiries. This makes things easier for the applicant as well. This is because in the case of an unsecured credit card you may have to understand various technical things like whether the crif score meaning is the same as cibil score or not or how is credit summary calculated but in the case of a secured credit card the process is much simpler.
Important things to keep in mind while applying for a secured credit card:
- Credit limit
If you’re applying for a secured credit card, don’t opt for a higher credit limit. It is always better to start with the lower limit and then increase your way up. If however, you do deposit a large sum of money don’t spend it all. This is important because banks frequently check your spending habits. Hence if you have a good repayment history banks may offer rewards on your credit card
While some banks ask you to deposit a minimum amount of money to be used as collateral for a card, many banks may also ask you to open a fixed deposit. This fixed deposit would be used by the bank in case you’re not able to pay the dues. And select the bank based on which option you are most comfortable with
before opting for a secured credit card from above make sure to know about all the benefits that you get. Secured credit cards get numerous amounts of benefits and discounts and only choose the one that has the best offerings.