Bank Secured Credit Cards

How Bank Secured Credit Cards Help Improve Your Credit Score

There are three types of bank secured credit cards available to consumers, and they are unsecured and secured. An unsecured fixed credit card is almost the same as a debit card, since it has no collateral backing up the credit line, and an unsecured card requires no deposit. A secured card, on the other hand, comes with a credit line based on a savings account or other deposit; most of these bank secured cards report to the credit bureaus, and can begin to help repair credit when used responsibly.

The first bank secured card was developed in the 1980s at the request of banks who were finding that their customers were becoming addicted to carrying credit card debt. The banks knew that some of their customers were capable of paying off their credit card bills at the end of the month, which would allow them to finance many different kinds of things, instead of just paying off the credit card as a revolving debt. To help encourage their customers to do this, the banks came up with the option of putting a certain amount of money on the card as security. This sum, accounts for part of the total amount of the credit line, and the rest is paid back if the cardholder makes their payments on time.

The banks saw some very early success, and began encouraging their customers to use them. They would allow the customers to have a certain amount of free cash available on the card, which would encourage them to use the cards for major purchases like car rentals and major dinners. Credit limits were set at $500 or $750, effectively doubling the spending power of those who used them. 개인회생 신청

In the early 1980s, this helped many people to live more enjoy their responsibly, and established credit a little bit better. Instead of having one card with a $500 spending limit, people had two credit cards with at least $2,500 each. When shops began to stock more 100% electronic products, the customers had a little extra borrowing power. The banks also began to take notice of this, as more and more of the stores wanted to be sure they would get all the cash on their credit cards, as opposed to just the cardholders. This opened up the market for the banks to start offering high limit unsecured cards to the people who had good credit, and this extended their credit lines.

These bank secured credit cards looked and worked pretty much the same as the unsecured cards are doing today. If the card holder made payments on time, the bank reported this to the credit bureaus, and this helped the card holder establish a good track record. By the end of the 1980s, there were over 1,000 bank secured cards with credit limits between $300 and $2,000, not to mention the ATMs that could be found anywhere within a 50 mile radius. Today, that number is well over 6,000.

So how has this benefited those with no credit? Well, while the traditional bank secured cards can be accessed by anyone with a valid Social Security number, these bank secured cards are more difficult to get. It depends on how much collateral the bank has to offer you against default. If it is a $2,500 line of credit, you will have a much better chance of getting it, while those with no collateral will have a nightmare trying to get anything. This has certainly benefited those with low credit limits, as most of the small loans which they were taking out in the 80s and 90s have been taken out using these bank secured cards.