Guaranteed Credit Cards
What are guaranteed credit cards?
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Guaranteed credit cards are also known as secured credit cards. The majority of credit cards are 'unsecured', which means that the credit card company will lend you money with nothing concrete to guarantee repayment. However, guaranteed credit cards are different in that you must first put money onto the card before it can be used.
So why do people use them? Guaranteed credit cards are aimed at people with a bad credit history. This could be the result of bankruptcy, county court judgements or missed/late payments on a number of other cards. In effect they act as a stepping-stone to securing a better credit rating. Once you have strengthened your credit rating you can then transfer to a 'normal' credit card. In addition they provide a way to pay for people who don't have bank accounts to pay for goods (without carrying around bundles of cash). Guaranteed credit cards are also a good idea for anyone wanting to travel abroad as they are backed by both Visa and MasterCard and accepted across the globe.
How do guaranteed credit cards work? The idea is really very straightforward: you pay money onto the card and then you can spend at will. They work as a method of financial management because you are not able to exceed your funds (and will therefore not get into debt). Payment onto the card may be made in a variety of different ways, including: via direct debit, by money transfer or across the counter in a high-street bank. Once you have paid-in money you can use your card in the normal way, which includes cash withdraws.
Some guaranteed credit card companies require a minimum deposit to open the account while others charge you for the privilege of owning a card (which can be expensive), for example: Want 2 Buy It charges £75 for their card, expects a minimum deposit of £750 and you're limited to spending up to 66% of your deposit. However, if everything goes according to plan it shouldn't be long before you are able to upgrade to an unsecured credit card.
Those who have known problems controlling their spending might be better off sticking with a guaranteed credit card.
Note: Guaranteed credit cards are only available in the US
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