For people with credit problems, a credit card called a secured credit card may be the right one for you.
A secured card is a type of credit card that is easy to obtain even if you have no credit, have very low-income, or are simply unemployed.
How to Get Started
One way to get started with obtaining a secured credit card is to open a checking or savings account. Then you should apply for a credit card from the same bank.
The minimum deposited amount needed is around $200 but this depends. The main strategy is to show the bank you have some collateral, which will help you obtain a secured credit card. Also note that retail cards and gas cards are easy to get for starters but they have low credit limits.
After Getting a Secured Credit Card
Once you acquire a secured credit card, use it to pay for small expenses. Make sure to pay it back before the deadline every month.
If you don’t want to use your card, be sure to use your card at least once every fiscal quarter (3 months) to build your credit history. Personally, I would use a credit card to buy stuff you need such as food, gas for the car, and etc. Just be sure to pay it all off before the deadline.
Furthermore, whenever possible, I would only utilize about 20~30% of your available credit limit. You can hurt your credit score if you max out your card all the time even if you can pay for all of it.
Why use just 20%~30% of Credit Limit?
Using more than 30% of your credit limit or maxing out your card shows you are living above your means! In contrast, using just 1%~20% of what you have in available credit shows you are living within or well below your means. You can occasionally utilize beyond 30% but just don’t do it all the time. Here’s a sample of one of my credit overview.
Likewise, as said in almost every post here, as a rule of thumb, I only use my credit card if I know I have that same amount of money in my bank. I also would not utilize more than 20% of my maximum credit line whenever possible. This style of habit guarantees me that I can properly pay off all my credit debts on time and that I do not need to pay any interests in the long run. Paying on time will make you appear trustworthy and responsible; two pillars that will help you build solid credit.
With time and continued positive credit history, having solid credit will help you increase your credit limit and it can also help you obtain an unsecured credit cards with even higher credit limits (above $10,000). Last but not least, having strong credit offers more financial opportunities such as loans for a house, a car, or even loans to start a business.
Secured Credit Card Policies will Vary from Bank to Bank
Keep in mind that the policies to acquire a secured credit card vary from bank to bank. Be sure to check as many banks as possible. Secured credit cards are a great way to get started in building your credit. Just be sure to know that the credit limits, minimum deposit requirements, and fees will vary from back to bank. Make sure review the applications and the terms of agreement very carefully. You can still screw yourself a bit if you don’t know what you are doing with secured credit cards.
For more detailed about secured credit cards, see this link: https://www.investopedia.com/terms/s/securedcard.asp