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How To Use Secured Credit Cards For Bad Credit To Rebuild Your Credit Rating!

Posted by Mr. Hachis | On: Oct 04 2010

Oh, are there still any people out there with an excellent credit rating? Yes, there are, but the majority of the consuming public has at least a few dings in their credit rating. If you've got bad credit, you've still got credit possibilities. Those bankers are so creative! However, secured credit cards for bad credit gives you a chance to start rebuilding your credit rating. Everyone needs to use credit at some point, if only for the convenience. You don't have to carry large amounts of cash while shopping, or hope a vendor will accept an out of town/area check. If you pay the credit card off each month, the interest is kept to a minimum and your credit rating improves, month by month.

Secured credit cards for bad credit risks are designed to keep you on the straight and narrow as you rebuild a good credit rating. Yes, it will cost you in terms of interest, but not so much as to make this proposition a bad deal. Here's how it works: you apply for the secured credit card and deposit any amount you wish – that amount becomes your line of credit. Think of it as a savings account from which you can only withdraw by paying interest. You can get cash advances and use the card at any retailer that accepts credit cards. There's no 'scarlet letter' emblazoned on the card, marking you as having bad credit. In other words, secured credit cards for bad credit work and look just like any other credit card, with the exception that it's not the bank's money you're using – it's your own money!

With that caveat, you need to understand that there's no wiggle room when it comes to going over your limit. Keep close track of your purchases and remaining funds. If you try to exceed your limit, the transaction will be declined and you'll be penalized with an immediate rise of your APR, which, with secured credit cards for bad credit, are typically healthy enough without you making it worse! Keep in mind, too, that you really don't want to spend all of your money on a shopping spree. Be prudent and reserve some of those funds for emergency use. Although cash advances cost you, it may be a better strategy to take a cash advance amount against the possibility of an emergency situation and use your remaining funds for everyday purchases, such as gas for your car, kid's school clothes and the like. For the maximum beneficial financial effect, you want to approach the maximum amount on your secured credit card, without going over! If you breeze through the month with no emergency money requirement, use the cash to help pay off the balance on your monthly statement. You then start fresh with a new month of full credit.

Most secured credit cards for bad credit come with the proviso that responsible use will generate a review of your 'credit line' within 3-6 months. The issuing company may raise your limit, with no additional deposit required. If you've been judicious and prudent in using your card, you might ask if you can get a reduction in your APR as well.

Naturally, the card issuer is in business to make money, but they also want long-term good customers. Typically, after a year of timely payments and no over-the-limit transactions, the card issuer will give you a true line of credit, with a higher limit.

So now you see how to make the best use of secured credit cards for bad credit. All you have to do is be responsible and patient. Good luck!

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