A Secured Credit Card Is Issued For The Security Of The Credit Card Supplier

Category: Finance, Credit.

Nowadays, more and more people are using plastic money to pay for purchases and transactions and carrying cash is slowly getting out of date.

A secured credit card is issued for the security of the credit card supplier. Some people may lose control of their spending habit and spend impulsively so the secured credit card, also referred to as debit cards came into existence. When you apply for this, you will be required to open an account with the card supplier but you must maintain a certain amount as cash balance in that account every month. The remaining cash balance stands as a security for the supplier of your plastic money. Usually, card suppliers who issue a debit card set credit limits between 50 to 100 percent of your account balance. Having a secured credit card means you cannot spend more than the set credit limit.

You cannot" borrow" from the card supplier to pay for your purchases. In reality, this is not a regular plastic money but a debit card because you are not allowed to spend what you do not have. The existence of this kind of affinity card is important because the problem with huge credit card debts is not a strange thing. Having this piece of plastic sometimes make people powerful and sometimes, they just do not think if they can afford to buy things because they do not have to pay cash for their purchases. Every day, millions of card holders are falling prey to this culprit. When the bills accumulate, this may result to defaults in paying on time and late fees and interest charges will be added to your account.

Paying off debts would not erase your records so if you smear your credit rating, it will follow and haunt you. Eventually you will get a bad credit rating that you may have a hard time applying for another card again, even if you apply from another company. Secured credit cards can help people regain their good credit rating and help them practice strict discipline every time they are tempted to buy things. Customers will also be trained to pay their bills on time, and the credit limit set by the card issuer gives them no choice to but curb their spending habits. This will give them a chance to think if they really need an item before picking it up and taking it to the checkout counter. In short, this gives them a chance to improve their credit rating and teach them the hard lesson of disciplining their spending habits. Some people use it because they do not want to be hassled with monthly bills.

The use of plastic however is not limited to customers who have bad credit rating. Some people just want to live within their means, and not think of buying things by borrowing from the card companies. Secured credit cards are becoming very popular among the people. This is living within their means.