Guide to Understanding Secured Credit Cards in Barrie, ON

June 26, 2018 | Posted by: Della Dwyer - Your Trusted Barrie and Surrounding areas Mortgage Broker

Like it or not, you need a credit card. It's hard, if not impossible, to reserve a hotel room or book a flight without one. They are also an important tool in establishing a credit history, which you must have to qualify for a mortgage in Barrie, Ontario.

However, getting approved for a regular, or unsecured, credit card isn't always easy. If you can't get approved for an unsecured credit card, look into getting a secured card instead.

A secured credit card allows people with no or bad credit to establish a credit history. They are beneficial for people that have declared bankruptcy, experienced job loss or are just starting out and trying to build a good credit rating.

Many banks, as well as some credit unions, offer secured credit cards. Credit unions that offer them to their members may not assess as many fees as some banks, so it's wise to shop around before applying.

To get a secured credit card you must make a deposit, normally a few hundred dollars, and the amount of your deposit is your credit limit. You'll earn money, usually about the same amount you would earn in a savings account, on your deposit.

You must make monthly payments on a secured credit card, just as you would an unsecured card. If you fail to make a payment, the bank will take the payment amount out of your deposit and charge you a late fee. While you won't go into debt, this may hurt your attempt to improve your credit history, so it's important to pay your bill on time.  

If you decide to get a secured card, research the fees that banks charge for them. While all banks charge fees for secured credit cards, the fee amounts vary greatly, so do your homework before applying. Look for application fees, deposit fees, annual fees, late fees and any other fees contained in the application's fine print.

The best way to use your secured credit card is to buy a few necessities each month and pay your balance in full and on time. Late fees will quickly decimate your deposit and hurt your opportunity to improve your credit history. Paying off the balance monthly looks good to credit agencies and may help you build credit faster.   

Banks will usually let you add money to your deposit to increase your credit limit. Some banks may increase your limit after several months of on-time payments without requiring an additional deposit.

Secured credit cards force you to save while providing a financial safety net. However, don't let this tempt you into keeping a secured card after your credit improves. Most secured cards come with high fees that many unsecured cards do not.

After you responsibly use a secured card for a year, you are ready for an unsecured card. Just continue to employ the good habits the secured card helped you establish. Pay your bill on time, don't buy more than you can afford and don't go over your credit limit.

Since they come with high fees, secured cards are not an ideal credit-building option. However, for some they are the only option to build or rebuild credit history. In this respect, they offer the sole opportunity many people have to gain access to credit, which is incredibly important.

Consider a secured card a temporary option that starts you on the path to financial security. Use it as a tool to build your credit history and establish good spending habits, this will ensure you qualify for a mortgage that gets you into your first home, dream home, or vacation home.  Have questions? Talk to a mortgage professional, Della Dwyer!.

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