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In Singapore, most credit cards are unsecured lines of credit. However, secured credit cards are also available for those who are unable to meet the eligibility requirements for unsecured ones.
This guide looks at the differences between secured and unsecured credit cards as well as options available if you have bad credit.
Secured credit cards are designed for people with bad credit, and they are used to help build-up credit history. These types of credit cards require collateral that’s typically made in the form of a fixed deposit. A lender can offset the debt using the deposit as collateral, in case you were to default on your repayments. That’s why it’s considered to be ‘secured’, from a bank’s viewpoint.
The approved credit limits you get with this type of credit card is determined by the fixed deposit savings you put down during application. You must make regular repayments and you will accrue interest on any unpaid balances. There is usually an interest-free period if you pay your account in full each statement period. Using the card to withdraw money from an ATM will incur interest charges immediately.
Your cash deposit is held by a bank that allows you to get a secured credit card. These are the features you can usually expect from a secured credit card:
Here are some of the features that set it apart from a debit card:
You can compare the differences between these two lines of credit below:
|Secured credit card||Secured personal loan|
|Security||Cash deposit||You may be asked to use a car as security|
|Credit limit||Set by cash security||N/A|
|Eligibility||Bad credit||Good credit|
|Availability||Available in Singapore||Available in Singapore|
Secured credit cards are usually suited to cardholders who have bad credit and want to use a card in order to rebuild their credit history. However, there are several reasons you may not qualify for an unsecured credit card.
Fees apply if you don’t make your credit card repayments by the due date. Late payment fees can be as high as S$80, so be sure to pay by the due date on the statement. You can try changing your repayment frequency or set up an automatic direct debit to ensure you pay your account on time.
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