You’ve probably heard of several ways to improve your credit score, including getting a personal loan for debt consolidation, paying bills on time, limiting credit applications e.t.c.
A credit card can be used for the same purpose. However, if you have a low credit score, it might be difficult to qualify for an unsecured credit card. Thankfully, there’s an option in the form of secured credit cards that can be used to build or rebuild credit.
To put it simply, a secured credit card is one where you put either a cash deposit or asset down in order to secure the card.
These securities function as collateral for the credit card in the unfortunate event of a default in payment. The deposit paid also functions as the credit limit. For example, if you wish to have a credit card with a limit of $10,000 you will need to deposit a similar amount.
Read more: Can I Apply for Quick Financing in Singapore Without Credit History?
Secured credit cards are designed for applicants with weak or limited credit background. In other words, it is meant for those who are building their credit scores so that they may be able to obtain better credit in the future.
Yes, if you choose to cancel your secured card with no defaults or missed payments, you’ll receive your deposit back in full. Credit card providers only claim your deposit if you default or have multiple missed payments. You will also have your deposit returned if you upgrade your card to a regular, unsecured one. This usually happens if you maintain a healthy repayment history.
Applying for a secured credit card is no different from applying for a regular credit card. In most cases, the option for a secured credit card will be put forward by the bank or provider, based on your credit score. There are some steps you can take to obtain the best secured credit card for yourself:
Just like regular cards, you should look at the different perks, bonuses, cashbacks and benefits you can enjoy from a certain credit card. Choose one that fits your lifestyle the best. For instance, if you often shop online, you may want a card that offers cashback on e-commerce purchases.
Apart from features, you should also check what minimum deposit the secured cards accept, how much annual fees and interests they charge, and whether they report to the main credit bureaus. Look out for an option to upgrade to an unsecured card later on when your credit scores have improved.
Your credit score is important as secured credit cards are specifically designed for those with weak or limited credit. Some credit card providers have a minimum or maximum score at which to offer these cards.
Once you’ve identified a secured credit card provider, make your application directly to them. This ultimately depends on the card provider, so the most effective step is to reach out directly to the issuing bank for clarification.
In some cases, secured credit cards may not be available through standard online applications. Instead, you might be required to submit an alternative application form or apply via a different channel. It’s best to confirm the exact process with the bank.
To be on the safe side, you can consider applying with DBS/POSB, as most of its credit cards allow you to place a fixed deposit as collateral. If you prefer not to wait on hold, you may also visit any of its branches in person for assistance, as DBS has a wide branch network across Singapore.
Read more: How Lendingpot Helps Clients Secure Low Interest Rates
For the application process, you will need to provide proof of identity and proof of income or employment.
Once you’ve been approved, you will be asked to make your secured credit card deposit to the provider, usually by bank transfer. The card will then be delivered to you and you will have to activate it and use it responsibly to build good credit. This includes paying your bills in full each month and not missing payments.
Rebuilding your credit scores takes time, effort and discipline, but at the end of the day, you’ll find it more than worth it. Secured credit cards offer a viable and simple way for you to do just that.
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