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Secured credit cards, where you pay a deposit to the card issuer up front, are designed to help rebuild a poor credit history. They’re available across the pond in the US but are not so common in the UK anymore, although Capital One has issued secured cards in the past. Don’t despair though: there are card issuers out there which offer cards specifically designed for those with bad credit – designed to help turn a credit record around.
Like any credit card, you’ll be required to make minimum monthly repayments towards any outstanding balance, and you’ll incur interest on any unpaid balance. However, there is an interest-free period if you pay your account off in full each statement period. Using the card to withdraw money from a cash machine will incur interest charges immediately.
If you’re offered a secured credit card, you’ll need to pay the security sum upfront before you receive the card. Your security sum can’t be used to make repayments, but if you fall behind on your minimum repayments, the card issuer could use some or all of your security sum to pay off any outstanding balances on your account.
Using a credit card rather than a debit/prepaid card also gives you access to purchase protection under Section 75 of the Consumer Credit Act for items individually worth £100-£30,000.
Secured credit cards can be a step in the right direction, but only if you have the money to pay the deposit in the first place. Once you’ve become a master of your credit handling capabilities and begin to see improvements in your credit score, you may no longer need to be tethered to a card with a security deposit – meaning you can apply for an unsecured card.
Eligibility checkers can be extremely helpful for people with bad credit but it’s worth noting that it’s not a guarantee that you’ll be accepted for a credit card.
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