Disadvantages Of Secured Cards

757 Words4 Pages
A secured credit card is one that is given against a collateral, typically a fixed deposit. The security deposit serves as a cash collateral in case of non-payment by the credit cardholder. The bank is permitted to liquidate the fixed deposit to recover debts in case of credit outstanding. Secured cards offer a great means for banks to reduce their risk by only extending as much as can be covered in case of any defaults by the cardholder. Secured cards have also become an integral part of building CIBIL rating. These cards are very well suited to repairing your credit score and credit report. Adhering to the terms of the card and timely payment of bills can ultimately enhance your credit report and CIBIL rating. The cardholder can only spend as much as he or she has, thereby limiting the chances of falling into a debt trap. For those who are struggling with a low rating, a secured credit card is a good option. If a bank turns down your application for a credit card because of low CIBIL rating and poor credit report then you can opt for a secured card which in turn will help improve your credit credibility. You would have to display financial discipline by making timely payment of expenses and maintaining a healthy usage of the card.…show more content…
Freshers usually find it difficult to get credit cards as they do not have a long credit history and hence cannot prove their creditworthiness. In such a situation they can choose to obtain secured credit cards, for which they would first be required to open a fixed deposit with the bank. These cards are also beneficial for retired individuals who have invested a great deal of funds into fixed deposits but currently lack regular income to meet the financial institution's requirements. A secured credit card serves as a good option for such

More about Disadvantages Of Secured Cards

Open Document