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A bad credit secured card refers to a credit card given to an individual with bad credit history in exchange of collateral. Unlike an unsecured card, which does not require any collateral and have higher credit limits, a secured one requires the person to deposit cash in the Savings Account of the bank against which the credit card is issued and are best for people who are beginners with no credit history or for individuals who have a bad credit history as a result of delayed payments. Once you show bad payment behaviour, banks or other big financial institutions providing credit cards would reject any credit card application from you in the future. Thus, bad credit secured card is the best option in this situation with the help of which you can improve your credit history.

Almost all banks and large financial institutions provide bad credit secured cards. The advantages of this are manifold. Firstly, it gives you a scope to use credit cards even when you have a bad credit history. Secondly, since one has to deposit cash as collateral and the credit limit provided is lower or equal to that cash, it restricts people to overspend above what they can afford to pay. Thirdly, since the interest rates are lower it is easier to pay back in time. But a bad credit secured card’s most significant importance lies in the fact that one can use it to improve his/her credit rating enabling you towards unsecured credit cards later on. Thus, for people who have already tarnished their image as bad payers and are not eligible for any other credit cards, this is the only way to bounce back.

In using a bad credit secured card to your fullest advantage, make payments on time and avoid any delays. Many people pay only the minimum amount due each month unaware of the fact that they anyways have to return the balance amount later and that an interest is charged on that balance amount. So the best strategy is to use the credit card and then pay the full outstanding amount for that month. Moreover, as a principle never use more than 30% of your available credit limit since apart from your payment behaviour, financial institutions also monitor the amount extended to you as credit. Hence, even if you pay on time, the more you borrow the less credit rating you score.

Lastly, remember to research the market well about all available options before going for a bad credit secured card and choosing one which is free and does not come with a fees or a compulsory investment proposition. E.g. A compulsory $75 insurance. Otherwise many a times it is seen that the fees or such hidden costs cover almost the entire amount of your cash collateral.