Pros and Cons of Secured Credit Cards
Last Updated : March 12, 2024, 5:36 p.m.
Banks and NBFCs started issuing secured credit cards for those who don’t have a credit history or a pre-approved offer. Well, these types of credit cards don’t demand any income requirement, nor a credit history. So if you are just starting to explore the financial services, a secured credit card will prepare you. But before you proceed, here we have listed down a few pros and cons of secured credit cards. Let’s take a look at the pros/cons and find out more about your secured card.
Decoding Secured Credit Cards
| Pros | Cons |
|---|---|
| Helps build or rebuild credit history. | Requires an upfront security deposit as collateral. |
| Easier approval, even for individuals with low or no credit. | Often comes with annual fees and other charges. |
| Generally offers a credit limit based on the security deposit. | May have higher interest rates compared to unsecured cards. |
| Encourages responsible financial habits. | Typically offers fewer rewards compared to unsecured cards. |
| Widely accepted, providing a card for various transactions. | May lack some features offered by unsecured cards. |
| Some cards allow transitioning to unsecured status. | Upgrading to an unsecured card may take time. |
| Helps monitor and improve credit scores. | Refund of the security deposit might take time. |
| Supports financial inclusion for those with limited credit history. | Missed payments can negatively impact credit scores. |
Credit Building with Secured Card
Opting for a secured credit card is a strategic move for those seeking to enhance their credit profile. These cards, backed by a security deposit, provide a safe avenue for credit building. By using the card responsibly, individuals can showcase their financial responsibility, gradually improving credit scores. This deliberate effort not only fosters a positive credit history but also creates a foundation for future financial endeavours. Offering a pathway to increased credit opportunities and financial well-being.
Credit Card Against FD
Secured credit cards require an upfront security deposit, serving as collateral to mitigate risk. While this initial deposit may seem like a limitation, it acts as a safeguard. The deposit amount often determines the card’s credit limit, fostering responsible use and ensuring that cardholders operate within their means. This unique feature not only supports financial discipline but also presents a valuable opportunity for you.
FAQs
Q. Why is it important to learn about the pros and cons of secured credit cards?
A. Learning the pros and cons of secured credit cards is essential for making informed choices.
Q. What happens to my fixed deposit if I cancel my secured credit card?
A. If you cancel your secured credit card, the FD is refunded to you, provided there are no outstanding dues.
Q. Can I upgrade my secured credit card to an unsecured one?
A. Yes, in many cases, you can upgrade your secured credit card to an unsecured one after showing responsible credit behaviour.
Q. How long does it take to apply for a secured credit card?
A. The application process for a secured credit card takes a short amount of time, often around 10 to 15 minutes.