Secured Credit Cards Can Establish Better Credit

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Getting Cash Back on Credit Cards
Cash back offers are a type of rewards program where the cardholder receives a cash rebate equal to a specified percentage of the amount charged to the card on an annual basis.

Cash back reward programs started appearing in 1990 when the Discover Card made their industry-shattering 1% cash back offer. Other cards soon followed.

Cash back programs typically come with higher in... Read credit cards article



Guaranteed Approval Credit Cards
Guaranteed approval credit cards are a rather new idea in credit cards for people with bad credit or no credit. Anyone who has tried to get credit for the first time or has tried to get credit with a bad credit history knows it is difficult, if not impossible. Credit card companies do not like to risk the chance of not getting paid, so they like to offer cards to those who are most likely to pay f... Read credit cards article



Secured Credit Cards Can Establish Better Credit
Secured credit cards are designed to assist people who have never had credit or those who have bad credit, in order to enable them to establish a good credit rating.

Typically, secured credit cards are issued when the holder is able to offer a type of "security" deposit to the lender by depositing a pre-arranged amount of money into a savings account, money market or certificate of deposit. This is how it works: Usually, for a small fee, the lender will allow the cardholder to utilize the credit card within the specified parameters. Unlike using the cash for any purchases, the secured card creates a credit history for the holder, thus contributing to their overall credit rating.

With a secured credit card, it is imperative that you make full payments each and every month; otherwise interest is charged on the outstanding balance. If you default, the lender will use the amount in the security account to pay off the debt and this can result in more damage to your credit rating.

As with any other financial undertaking, it is important that you read the fine print so you are totally aware of exactly what you are paying for. There are some pretty unscrupulous predators out there whose primary goal is separating you, the consumer, from your money. For this reason, you should pay particular attention to the fee schedule prior to accepting any offers for credit cards. Of course, no-fee credit cards are best, but most often the lender will require a small one-time activation fee, which can typically range from $25 to $30.

The onus is on the user to be vigilant when obtaining credit, so it is your responsibility to make sure there are no hidden fees. Special care must be taken when the contract contains clauses outlining registration charges and/or set-up fees. In some cases, the cost of the card can quickly exceed your credit limit, thus only adding to your credit woes.

With a secured credit card, you will of course pay a higher than average interest rate, however, this does not mean that the interest charge is outlandish. Many secured cards offer competitive rates under 19% and again, this is where diligent research on the part of the user becomes paramount. You should be cognizant of all grace periods, the penalty for late payments and the fees charged should full payment not be made within the proscribed time frame.

Once you show due diligence over the specified time frame (most lenders like to see a history of six months to one year of responsible credit card use), the creditor may offer to double the amount of credit available to you, with a portion of this fixed amount being unsecured. Should you choose to close out the account, however, the unsecured funds must be returned to the lender.

The cardholder should ensure that the creditor regularly informs credit-reporting agencies of their payment history. Once it can be established that you are using credit reliably and sensibly, your credit score will increase and you will then be eligible to apply for an unsecured credit card.

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Credit Card Debt Reduction - Snowball Method Explained

Credit card debt can be a major source of stress and anxiety in a person's life. Unfortunately, it's all too easy to spend the money but when you're faced with having to pay those cards off, it's a whole different matter.

If you've looked into debt reduction, you may have heard of something called the "snowball" method. This is an effective way of dealing with the debt on your credit cards, that has worked for many people.

The first step in the snowball method is to write down all the balances on your credit cards, their interest rates and the minimum payments on each.

Add up all the minimum payments - and all your other monthly payments - and decide how much extra you have left to pay towards your credit card balances.

Now take the card with the lowest balance and add that extra payment to the minimum payment. Do this each month until you have paid that card off.

When the first card is paid off, take the amount of the payments you were making on it and add it to the minimum payment on the remaining card with the lowest balance. Again, make this extra payment every month until that card is paid off.

Keep doing this for the lowest balance card each month until all your credit cards are paid off. It's surprising how quickly the payments can snowball (hence, the name) after you have paid a couple of credit cards off.

Some people prefer to pay off the highest interest rate cards first, since that will save more interest in the long run. There's no reason you can't do it this way but many people find it more motivating to see cards get paid off quicker.

Whichever method you use is up to you. The key is to stick with the plan every month until all your cards are paid, and resist the temptation to use the cards once they're paid off.




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Secured Credit Cards Can Establish Better Credit
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