For many new immigrants and people rebuilding their credit in the U.S, getting a traditional credit card can be a challenge. However, a secured credit card may be the ideal solution to start building a solid credit history. We have prepared a special article for you to understand in practice what insured credit cards are, how to obtain them and the benefits they offer if you are considering immigrating to the United States.
What is a Secured Credit Card?
A secured credit card is a financial tool designed to help individuals establish or rebuild their credit. Unlike traditional credit cards, secured cards require a security deposit that serves as collateral for the card issuer. This deposit is normally equivalent to the card's credit limit.
How does a Secured Credit Card Work?
- Security Deposit:
- When you open a secured credit card account, you will make a security deposit, usually between $200 and $2,000. This deposit serves as collateral and determines your credit limit.
- Card Usage:
- You can use the secured credit card in the same way you would use a traditional credit card. It's important to use your card responsibly, only spending what you can pay off in full each month.
- Credit Reports:
- Your card issuer will report your payment history to the major credit bureaus (Equifax, Experian, and TransUnion). Timely payments will help improve your credit score over time.
How to Get an Insured Credit Card
Here's a step-by-step guide to getting an insured credit card in the US:
- Search Available Options:
- There are many insured credit card issuers. Compare fees, deposit requirements, credit limits and additional benefits offered by each issuer. Some popular options include Discover it® Secured, Capital One® Secured Mastercard® and Citi® Secured Mastercard®.
- Check Eligibility Requirements:
- While secured credit cards are more affordable than traditional cards, some issuers still have minimum requirements, such as U.S. residency and a Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN).
- Request the Card:
- Complete the application form for your chosen insured credit card. This can usually be done online. You will need to provide personal and financial information, as well as the security deposit amount.
- Make the Security Deposit:
- Once approved, you will need to pay the security deposit. This deposit will be held by the card issuer as long as the account is open and in good standing.
- Receive and Activate Your Card:
- Once the deposit is processed, you will receive your insured credit card in the mail. Activate the card by following the instructions provided.
Benefits of a Secured Credit Card
- Credit Building:
- Using an insured credit card responsibly is an excellent way to build or rebuild your credit history. On-time payments and maintaining a low balance against your credit limit help increase your credit score.
- Ease of Obtaining:
- Secured credit cards are more affordable for people with little or no credit history, as well as those with bad credit.
- Expense Control:
- The credit limit is based on the security deposit, which helps you control your spending and avoid accumulating debt.
- Transition to Traditional Cards:
- After a period of responsible use, many insured credit card issuers allow you to transition to a traditional credit card and get your security deposit back.
- Additional benefits:
- Some insured credit cards offer rewards like cashback, no annual fees, and additional protections like travel and shopping insurance.
In practice, when you choose to apply for a secured credit card you will be taking a crucial step towards building or rebuilding your credit history in the United States. With responsible usage, you can increase your credit score and eventually qualify for traditional credit cards and other forms of credit. Research well, choose the card that best suits your needs and use it prudently to ensure a solid financial trajectory.
For more information and support in the process of obtaining insured credit cards in the USA, contact Planeja USA. We're here to help you navigate the American financial system and achieve your financial goals.
