The Difference Between Secured And Unsecured Credit Cards

On December 12, 2009, In credit card

Do you own a credit card?  Now let me ask you this, is it a secured credit card or is it an unsecured credit card?  Chances are it’s an unsecured credit card.  So you might be wondering, what’s the difference between a secured credit card and an unsecured card?

In this post I will be explaining the difference between the two and which one would be right for you.

Unsecured Credit Cards

These credit cards get their name from the fact that they aren’t backed by any type of asset.  In fact a credit card is a loan in itself just like a mortgage is for your home, except a mortgage is backed by an asset, the house.

So how do the credit card companies know how much credit to give you?  They look at your credit history and if you have a great credit score and no mistakes on your credit report you’ll be allowed access to a greater limit.

The down side to these cards however is the fact that you have to usually have somewhere between good and excellent credit to get one which is where the secured version comes in.

Secured Credit Cards

How a secured credit works is that you aren’t given credit based your credit score but rather by depositing money towards the card much like a debit card.

In this sense the risk of the card is not held by the credit card company now but instead is now placed on you.  If you fail to make payments it’s because you failed to add money to your card and maintain it properly.

The great thing about these cards are the fact that you don’t need great credit to get one, and that over time with managing the card properly you will also build up your credit.

So Which Is Better

Both types of cards have their advantages.  However if you look at the statistics the 10 top credit cards that people are using are unsecured cards.  Though you still have to find what is right for your situation whichever type you choose to make use of.

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Get Out of Debt with a 0% APR Balance Transfer

On December 9, 2009, In credit card

The 0% APR balance transfer option is for the person who has a high interest credit card and a card balance that is pushing pretty close to the maximum limit. Taking advantage of the zero APR balance transfer is a smart first step for anyone seeking to reduce overall credit card debt.

The clear advantage of the 0% APR balance transfer credit card is that it saves many dollars in interest in just a matter of about six months. Without having to focus so much on the interest, you have a fighting chance to pay off a balance.

Generally, the payment on the new account you receive after you do the 0% balance transfer will be lower than the interest bearing payment you made on the old account. It is wise to use the money that you save to apply toward your principal balance.

Many have also used the extra cash to build more cash flow on a monthly basis. It may make a borrower feel good to have access to cash, but it does not put a dent in debt; and the longer it is accessible, the more tempted many people are to spend it and create even more debt. This is exactly what the credit card companies are counting on. They want you to use your new 0% transfer card to by additional things that generally don’t get the same treatment as the balance of the transferred debt. Many times, new charges accrue interest at the normal interest rate.

Naturally, a strong resolve and a commitment to actually paying off the credit card balance is the only thing that will make consolidating debt with a new credit card have a significant impact. You have to want to get yourself out from under your debt.

If you use the 0% APR balance transfer card option, you should be aware that there is often a balance transfer fee or an annual fee for the card. Be prepared for the fees and make sure that any deal you decide to take makes sense financially. Additionally, applicants should always read the terms and conditions carefully, since most offers of this kind are time-limited. Usually, after three or six months, an interest rate is added back to the card or to the transferred balance.

If you have not used the time wisely to pay down the balance, you are right back where you started – with high interest on a card that still has a balance. This can defeat the entire purpose of the 0% APR balance transfer.

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Credit Card Debt Management

On April 17, 2009, In credit card

Two decades ago very few people in the UK had one, today there are 100 million credit and debit cards in the UK. Combined with the precarious state of the world economy this has created a huge amount of credit card debt in the UK.

Credit Card debt has a habit of slowly sneaking up on you, only making itself known when the problem has become too large for you to manage easily. With large interest rates applied to the money you owe it is essential for your long term financial health that you do everything in your power to clear these debts as quickly as possible.

It is important to look at Credit Card debt as it relates to your entire current financial situation.

This of course means creating a budget of your income and expenses. With a budget in place you will be able to see how much money you have left at the end of the month, and therefore how much you can afford to pay your creditors.

The problem with large credit card debts is that it can get to the stage that you are paying back a substantial amount of money each month but in doing so you are mostly only clearing the interest due on the money owed.

In this situation it makes sense to get in touch with the creditors and explain your dilemma asking if they would be willing to reduce the interest charged on the debt to enable you to repay the money owed.

Of course, the creditors are not legally obliged to do so but many will be willing to help you out, especially if you produce a budget outlining the situation and detailing the specific amount that you will be paying each month.

It may be worth applying for a new credit card which is offering a 0% introductory offer and transferring as much of the debt onto the new card as possible. You can then use the money you would have spent on interest on clearing the debt itself. As you clear these credit card debts be sure to take a pair of scissors to the cards and put them where they belong.

As always, contact the Citizens Advice Bureau if you feel your debts are getting the better of you.

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How To Pay Your Credit Card Off

On April 17, 2009, In credit card

Taking the steps necessary to pay your credit card off as quickly as possible is the perhaps the most important thing you can do it to ensure future financial security. The high interest rate applied to credit card means that any outstanding debt you fail to pay off each month becomes an unnecessary drain on your monetary resources.

Finding yourself in a situation where they have more credit card debt than you are able to handle can be a deeply depressing and lonely experience.

Thankfully there are some simple techniques you can use to help steer your way out of difficulty. Get as much information as you can, create a plan and carry it out.

1.Learn to keep a budget, with an aim of lowering your spending in every possible area. eg. Cut out non-essential items such are eating out, purchasing CDs, magazines etc.

2.Stop spending money on your credit cards, which will obviously only add to the problem.

3.If you have debt on several credit cards start by paying the cards with the highest interest rate first.

4.If you have any excess money in savings accounts, use it to pay credit card debt reducing interest repayments.

5.Contact the credit card companies individually and ask for a reduction in the interest rate to help you pay off the debt you owe them.

6.Move as much of your debt as you can to credit cards which offer a 0% interest introductory rate, giving you a 12 month holiday on the interest charges.

7.Use money left over at the end of the month to pay credit card debt.

8.Even though you should be concentrating on the credit card with the highest interest rate, make sure you pay the minimum on all other cards to avoid charges.

9.Close each credit card account as you pay off each balance.

10.When you have paid off your credit card debt continue to practice the lessons you have learn on your journey to being credit card debt free.
Start doing something practical today! Write a budget or call the credit card companies to arrange a reduction in interest rates, the quicker you get started, the easier the whole process to reduce credit card debt will be.

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How To: Choose A Credit Card

On April 17, 2009, In credit card

When looking for a new credit card there are several factor to take into consideration if you are to find a card that is suitable for your current situation and your general spending habits.

It seems that everywhere you turn these days there is a sales representative ready to thrust a credit card application in your general direction, usually baiting you with promises of unmissable special offers if you’re willing to divulge your personal details. However, keep in mind that applying for a credit card is not something that you should be doing on a whim, educating yourself on the available options before taking the plunge could save you a lot of money and heartache.

Not all Credit Cards are created equal, interests rate can vary widely between issuers, some cards will charge you an annual fee for their services and some will even entice you with valuable extra benefits.

Are the type to pay off you credit card in full each month, or do you have a large outstanding balance that you are desperate to pay off?

Users with existing credit card debt will want to transfer to a new card that offers 0% interest on new balance transfers, this is a great way to cut down on your monthly expenses. Just make sure you are committed to paying of the balance in full before the introductory offers ends in 12 months time.

If you make a concerted effort to pay your credit card balance in full each month and currently have no credit card debt, you will find it most beneficial to look for the card with the lowest Annual Percentage Rate (APR) and the most attractive special offers. You can apply for a card knowing that you won’t be chopping and changing on a regular basis searching for 0% deals so choose a card from a reputable issuer who you will be happy to stick with.

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