We live in a time where having a credit card is a necessity. People prefer carrying cards with them no matter where they go because plastic is the preferred method of safe purchasing in the absence of paper money. The option of name secured credit cards implies that some credit cards are unsecured. However, secured credit cards are simply credit cards with high interest rates.
How Secured Credit Cards Work in Canada
Secured credit cards are similar to renting a home. It is like depositing money into the bank the way people give a security deposit on a rental unit. When a tenant leaves the place without causing any damage to the property, the security deposit is returned without any deduction. Even the interest (if any) is also reimbursed. When consumers apply for a secured credit card, banks also require a certain amount as a deposit against the credit limit, so only you and your bank know the value of your secured credit card.
Benefits of a Secured Credit Card
If you are a business owner trying to build your reputation within your field or you want to build a house in the next few years or start some new economic venture in the near future, you will be required to have a good credit history to do all these works. Though credit cards offer slightly higher interest rates, they have an advantage of building a good credit score when used properly.
From a future investment point of view, a secured credit card can make it easier for clients to build their credit history. The card also ensures safety and confidentiality because the cardholder is their own custodian of the money. This way, one is able to keep track of all transactions history. Safety is guaranteed.
To get a secured credit card in Canada, you need to have a small sum of money–it doesn’t have to be hundreds. If you tend to push your credit limit, you can make all payments in the form of installments to ensure payment deadlines are met. This helps protect your credit score.
Disadvantages of a Secured Credit Card
The safety of the bank account is maintained by the bank authorities themselves; this gives an image of the card having slightly lower interest rates. The truth is that the card offers higher interest rate compared to other options, so it may only be suitable for a select group of people.
Consumers who opt for secured cards should do their homework before accepting any bank offers. Don’t stumble into a hasty decision that could spoil your credit score.