Credit cards are considered as an efficient financial tool that helps develop an individual’s purchasing power and maximize savings. Credit cards are offered by several financial institutions with different features and benefits.
As per customer needs, credit cards come in several categories. One such type is secured credit cards. This type of credit card is backed by a fixed deposit made by the cardholder. The deposited cash acts as collateral against the credit account issued.
Credit cards which are secured with fixed deposit are also used as a tool to increase CIBIL score if an individual has a poor rating or no existing credit history. This ensures they become eligible to avail a general credit card. The card also assures security to the issuer in case the cardholder is unable to pay the credit card bills.
One of the features of these credit cards, as compared to unsecured cards is that it has lower credit limits and is an ideal option for people who have limited monetary requirements.
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Features and advantages of a secured credit card
You must choose the right credit card for yourself to make the most out of the features of a particular card. The different features and advantages of a credit card you can enjoy if you secure it with cash deposit are as follows –
- The approval process for a secured credit card is less stringent as a borrower presents a sum of money as collateral.
- You can earn interest on the money you deposit as collateral.
- Your deposit is safe and secured with the issuer. It is liquidated only if you fail to pay the credit card bills. Likewise, you can also experience robust security and exclusive benefits with the likes of Bajaj Finserv RBL Bank SuperCard.
However, the most crucial use of credit cards secured with collateral is that it serves any financial requirements along with boosting your credit score.
How to use a secured credit card wisely?
To enjoy the benefits of having a credit card, you must know how to use it wisely. Here are certain ways to use the card in a smart manner-
1. Make multiple payments instead of a single one
The credit score improves when you gradually pay your bills, instead of paying a lump sum amount at one go. Thus, making multiple payments within the due date is a wiser alternative as compared to making a single payment at the end of the month.
2. Making small purchases and spending within the limit
An individual can benefit from making use of a credit card for small purchases. This helps you to remain within the credit limits and easily pay off the due amount each month.
3. Pay bills on time and more than the minimum amount
Try to pay the entire due amount rather than the minimum amount. It shows that you are a responsible borrower and leaves a positive impact on the credit score. You can also avoid paying interest on the purchases by not carrying forward the balance to the following month.
4. Enrolling yourself in auto-pay plans
While you apply for a credit card online, look for an auto-pay facility from the issuer. This feature allows the card provider to automatically deduct the monthly due from your bank account.
You can also set reminders so that you do not end up missing the payment deadlines of your credit card bills.
A secured credit card is comparatively easier to avail even with minimal credit history. You can easily switch to this credit card if you do not qualify for availing a general credit card.
Individuals having a credit score ranging from 580-670 can opt to avail a secured credit card. Eventually, the individual might also be considered eligible by the issuer to own a traditional or unsecured credit card.