Generally speaking, the card issuer will keep your deposit as a ‘safety measure’.
You may ask, “Why would I do that”? This is really only for two situations. The first is for people who have lost all of their credit rating and can no longer get any credit from anyone. The second is for those just starting out who have a zero credit rating and need to build a rating up.
There are actually more options for the second group. The first group is more risky because they ‘messed up’ at least once before.
In either case, the idea is to establish a record of responsible credit card use. This is to create trust between you and future potential lenders.
You are showing them that you know how to use your credit in a way that is appropriate. Their chief concern is always losing their investment in you.
If you do not pay your bills, they lose money. They are not in business to lose money. Obviously, when you don’t pay your bill, they have lost out.
If You Are Able To Get A Secured Credit Card
You won’t be permitted to spend above the amount you have on deposit with them.
You do not want to either. You will want to pay your balance every month before the next billing cycle starts.
The reason for this is that you want to show that you are responsible with your credit.
You want to show them that you repay your debts on time, every time.
It may take a solid year. But after that time, you may find that you will be able to get an ‘unsecured’ credit card.
An unsecured credit card is one that is based on the faith of your signature and does not keep a deposit.
If you make it to this stage, you will want to maintain your credit by continuing to be responsible.
We all have to work within the limits of our budget. Once you show them you are responsible, you will want to maintain their trust by continuing to be responsible.
Be Very Careful When Selecting A Company That Offers Secure Credit Cards
You should be extremely careful when seeking out a secured credit card.
It can be the pathway to rebuilding your bad credit past as well as a good way for people who have never had any credit to develop a credit record.
There are decent companies that offer secured cards.
However, the secured credit card industry appears to have a lot of scam artists in it as well.
There are people / companies that might take advantage and hurt you. Do your homework and be very careful with which company you choose.
Some charge much higher annual fees and interest than is reasonable.
Apparently, there are some which are outright scams. They use your whole deposit up in fees that you probably didn’t even know about.
Again, you really need to do your homework before sending your money to anyone.
Beware of those who want a fee before you even get your card, that is a sign of trouble.
You also want a company who reports on your credit use but does not report your card as a ‘secured’ card. If they do, this could potentially scare off other lenders.
A reputable company should understand this point and should not report your activity (credit card use) as being on a secured card.
Finally, even though I said it before, be very, very careful. Check everything out and don’t send your money to just anyone. Make ‘triple’ sure you are working with a reputable company before getting a secured credit card.
Otherwise, you could end up with more headaches than you started with!
The good news is that if you focus on responsible credit card use, you may eventually find your way back to a good credit rating. Of, if you have never had a credit rating, perhaps you can now build a good one.
It might also be to your benefit to understand how the world’s banks work.
Then, there is also Jimmy’s credit repair story
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