Credit cards can provide a way to rebuild your credit, whether you are coming out of bankruptcy or you are repairing damaged credit. A secured credit card carries extra benefits that traditional personal credit cards might not. If you need to rebuild your credit and want to have a card available for emergencies, consider the following reasons to choose a secured personal credit card.
When you open a secured credit card, you'll be required to submit an amount equal to your credit limit to the issuing bank. This money is typically held in an interest-bearing account for a certain length of time. The bank may hold the money until you've established an excellent payment history, though some cards may have a set amount of time the money can be held for. Once the money is released, it's yours to spend or continue saving. If you have difficulty keeping money in a savings account, a secured credit card can help ensure you have money put away for the future.
Having a lower credit limit does prevent you from making large purchases, but it can also help you manage your debt. The temptation to buy big-ticket items you don't need won't be there, as you won't have a card that lets you spend a lot of money in a single transaction. You can use the card to practice responsible spending, retraining your habits to help you live within your means. For some people, this may help prevent creating a new mountain of debt after a bankruptcy.
Lack Of Collection Notices
In the unfortunate event that you aren't able to pay your bills, a secured credit card can prevent you from receiving unwanted collection calls and notices. The money you put down when you open your account is used to cover the amount you owe if you default. It's important to remember that late or missed payments will still impact your credit rating, as they will be reported to the major credit agencies. However, you won't have to worry about accounts going into collections.
Peace Of Mind
After consolidating debt or filing bankruptcy, you might feel as though you have no safety net for emergency expenses. Opening a secured line of credit gives you a card you can use should you have an unexpected expense, such as a car breakdown or urgent medical need. This can provide added peace of mind and a sense of security, as you won't have to worry about wiping out your savings to cover costs you had not budgeted for.
For more information, contact a company that provides personal credit cards.