Friday, March 27, 2009

Secured Credit card vs. Unsecured Credit Card

Credit cards are one of the most important financial tools that have swayed the market. If you possess a good credit report or are facing a bad phase in maintaining your credit report; the credit card companies enthrall you with unending options to apply for a credit card. But there are different types of credit cards that are designed by looking at the needs of different consumers. The consumers of credit cards involve people with bad credit as well as good credit.

Basically, a credit card is divided into two major types - a secured credit card and an unsecured credit card and both share different features and functions. So, before you apply for these credit cards you have to learn about them thoroughly. 

When you apply for a secured credit card, you are supposed to deposit a certain amount in the bank or with your creditors, and at the time of purchase of goods and services, the amount that you have deposited becomes your maximum credit limit. 

When you decide on your credit limit your lender provides you with a choice, where, either you can deposit the entire money before hand, or you can pay it through monthly installments. But when you pay the credit limit in installments, the lender will ask you to pay some percentage of the balance along with the interest rate before granting you the credit card. 

Secured credit cards can be beneficial for you in many respects, and the biggest advantage is that they help in managing any debts that you may have. As a secured credit card assigns you a fixed limit, therefore, you will have to abide by that credit limit. So, you will not spend exuberantly. Another factor is that when you deposit your credit money it will help you prevent default and improve your credit-score as well. 

Unlike the secured credit card, unsecured credit card does not require the deposit or a down payment of the deposit. Unsecured credit cards have a higher limit and often involve low interest rates. If you are the kinds who are good at managing their credit debt, and make the payments on time, then you should apply for an unsecured credit card. 

Your credit rating is the deciding factor on which you can apply for any kind of credit card. When you apply for secured or unsecured credit card, your lender will examine your credit history first, and will grant you the credit card on those grounds. But it is advisable that you should be aware of all the terms and conditions, and then apply for your credit card. 
Always keep the grace period in mind and make regular payments accordingly. Late payment means penalty, and higher interest rates, so try to make the payments on time. Another thing to remember is to keep a constant check on your accounts and stay attentive to deadlines as well. 

Both secured and unsecured credit cards are beneficial for you if you invest in them after analyzing your financial condition. Gain proper information and then plan which credit card to invest in.

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