What are the Downsides of Using Secured Credit Cards?

What are the Downsides of Using Secured Credit Cards?

Most online resources today talk only about the beneďŹ cial features of secured credit cards. But are there downsides to managing these lines of credit? And how can cardholders, like you, avoid or properly deal with them? To know the answers to these questions, we suggest that you pay close attention to the paragraphs below. Here are 3 drawbacks and how you should deal with them.

A low spending limit.

Most secured lines of credit tend to have low spending limits. The reason for this is that the credit limit set on these card programs usually depend on the security deposit submitted by card applicants. And since a lot of prospective guaranteed approval store credit cards holders wish to curb their spending habits, most of them make just the minimum deposit required by their target card issuers.

Now, how should a cardholder, like you, deal with such drawback? If you want a credit card with a relatively high spending limit then, you have to look for a card company that lets you decide on how big or how small your initial deposit will be.

That way, you can simply provide a lump-sum for you to enjoy a high credit limit, which would allow you to charge huge purchases and bills on your secured line of credit.

Payment delinquency can inict further damage to your credit history especially if you have a low credit score.

Since most issuers of secured cards provide timely reports of cardholder activities to the three major credit bureaus then, you can expect that skipping on just one bill can have an immediate and huge impact on your credit history. In fact, it can pull your score down and further limit your chances of qualifying for unsecured credit cards.

This means that you should resolve to always keep up with your credit card bills, no matter what. See to it that you pay your credit card charges in full and on-time, each month. That way, you can cause gradual improvement to your credit history until you are able to fully recover your financial health.

Making on-time and complete payments also has financial benefits. By paying your credit card balance in full, you can avoid incurring huge interest charges. At the same time, by making early or on-time payments, you won’t have to pay late payment penalties and surcharges.

Closing down an old secured credit card can cause your score to drop.

This is especially true if you used a secured line of credit to jump-start your credit profile. After all, a bulk of your credit history will be erased from your credit records should you decide to close down your old account. So, what should you do then?

Well, you can simply keep your credit card active. Charge small purchases on your card, like groceries and some of your bills and make sure that you pay them immediately. And make sure that you don’t spend beyond your credit limit or else your credit rating might suffer. One thing that can help you in this matter is to check the available funds you have on the card before you use it to pay your bills or purchases.