What is secured credit cards?

Secured credit cards popular among customers with bad credit score. It could be useful tool to build or rebuild credit score but it takes long time.

It’s popular to use credit card in developed countries but it’s not always easy to get unsecured credit card. Financial institutions which issue credit cards require issuance from customer that he & she will pay back on time otherwise interest rate applied. Here is a difference between regular credit card and secured credit card:

  1. Regular credit card based on line of credit & customers promise to pay back money. If minimum monthly payment missed than credit score reduce and applied interest rate. Lower credit score leads to higher interest rates.
  2. Secured credit card is the only option for customers with no credit score or low credit score. Applicant has to put money on card as collateral and that amount is credit limit. For example newly launched Amazon secured credit card requires applicants to recharge card balance for $100 – $1000 which become the credit card limit.

By issuing secured credit cards bank target next customers:

  • Low credit score.
  • No credit score.
  • Unbanked (no bank account or no access to open bank account).

Across the world available different credit score bureaus which capture, update, store records of customers’ financial life. In the US available 3 major credit bureaus: Experian, Equifax, TransUnion. In India biggest credit bureau is CIBIL. China’s credit bureau called China Credit Reference Center by the People’s Bank of China.

Amazon partnered with Synchrony bank and unveiled secured credit card for credit score building. In order to use card, applicants required to deposit refundable security deposit. It’s a first time online retailer came up with credit score builder. Synchrony bank will report customers payment history to three major bureaus.

According to Synchrony Bank Amazon Store Card Credit Builder Account agreement APR (annual % rate) for purchases is prime rate plus 22.74% but will vary with the market on the Prime Rate. The daily rate for purchases is 0.7737% (APR 28.24). Customer’s due date is at least 23 days after the close of each billion cycle. Is customer missed payment than interest charge would be not less than $1.5 and calculated based on daily balance. Late payment fee: $27 or $38.

Amazon’s secured credit card APR and daily rate vary based on highest bank prime loan rate (last business day on of the calendar month). Rate published in The Wall Street Journal (Money Rates section).

In the agreement mentioned that credit limit is equal to deposited funds. This card could be used on Amazon on in merchant shops which enabled secured credit card as payment.

Amazon’s credit score builder is amazing way to give chance for unbanked citizens to get high credit score and benefit from it. Also available another similar secured credit cars from other banks with similar terms and conditions.

Disclaimer. I’m not paid to publish this article. Personally I don’t own a credit card and never used a loan for purchase. But I do deep research in finance and I can share valuable information.

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