Credit Card Or Secured Credit Card? Which One Is Best For My Lifestyle
By Tanya Coles
Are you pondering on whether you should apply for a card? Well, the answer quite simply is – ‘Yes’ - you should apply for a card (this is true for most people). The cards seem to have transformed our lives. In fact, one can term cards as a revolution. Today, you find ads in TV/newspapers/website/shops and almost anywhere and everywhere; all asking you to apply for a card. When you look around, you see that most people have cards. In fact, most people have multiple cards. Everyone seems to apply for a card. So, why should you apply for a card?
There are a lot of benefits associated with cards; however, the most important benefit is the convenience that they offer. For most people, this is the prime and the sole reason that instigates them to apply for a card. This wouldn’t have been the case a few years ago, when not many merchants accepted cards. However, today, most merchants do accept cards. So, instead of carrying a lot of cash on you (which is both inconvenient and unsafe), you can just carry a small piece of plastic with you.
Moreover, you get interest free i.e. you don’t have to pay the bills till the next monthly billing cycle. So, you can buy now and pay later (when your salary arrives) – a great reason to apply for a card. To add to that, there are certain merchants that offer interest-free installment payment plan i.e. you can make a big purchase today and pay for it in installments on your card. So cards works as instant long term loan too (not just a monthly loan). Yet another reason to apply for a card is the discounts on shopping. This is made possible by the tie-ups between card companies and the merchants. So cards offer many benefits.
There are various ways in which you can apply for a card - you can apply for a card in person, you can apply for a card on the internet and you can apply for a card on phone too (by asking the representative to meet you). You will as such be approached by a lot of sales representatives, all asking you to apply for a card with their company.
To apply for a card, you will need to fill-in a card application form (which is easy to fill and the representatives of the card company will assist you in that). When you apply for a card, you basically enter into an agreement with the card supplier (the form that you fill when you apply for a card is actually an agreement). After you have submitted your application, the card company conducts certain checks to determine your credibility; and if everything is fine, you receive the card.
So, applying for a card is easy and to apply for a card or not to apply for a card is a matter of personal choice. However, for most people who don’t have any card, the recommendation is “Apply for a card”.
Just browse through the daily newspaper and you will be overwhelmed by the number of card offers advertised. Move around the town and you will find card offers being advertised everywhere. Same is the case is with television which seems to host a number of card offers too. So, the card offers are there everywhere. Why are there so many card offers? Well, quite simply because card business is a highly profitable business for the card suppliers.
In this situation, when there is no dearth of card offers, which is the best card offer?
There is nothing like a best card offer, really. A better question to ask would be – ‘Which card offer is the best for me?’ The spending habits of one person are different from that of another person. Their living styles vary and hence their needs vary too. So for deciding on which card offer is best for you, you need to evaluate your needs vis-à-vis your lifestyle and your spending habits (and not go just by the recommendation of someone).
For example, if you frequently travel by air, a co-branded airline card might be more suited to you than the general purpose one. These airline cards offer discounts, rebates and other kind of rewards when the card is used for making payments (the rewards are even higher when these cards are used for paying for the airline tickets or other airline products).
Similarly, if you have a favorite retail store where you do a lot of your shopping, it would be beneficial to check if the retailer is a card supplier too and if there is a card offer that suits you. A lot of big retail chains do offer co-branded cards to their customers and these cards offer rebates/discounts etc when they are used for making payments at the retail store. As such, you get reward points for making payments at any place but the rewards are higher on the payments made at retail store.
On similar lines, we have cards for gas stations and grocery stores too, which you can opt for if you have a favorite gas station or a favorite grocery store where you shop a lot.
So, if you look around, you will find a lot of lucrative card offers. However, this doesn’t mean that you enroll for all the
credit card offers. You need to first evaluate your needs and rank them. Then you need to evaluate what all card offers suit your needs. And finally you can make your choice and go for a card offer that covers most of your needs and gives maximum benefits.
Some of us though don’t like the idea of being in debt. Here is where the idea of a secured card comes in.
Secured cards are another very popular breed of cards. Secured cards, as their name suggests, are secured. Well, they are secured for the card supplier, really. Secured cards require you to open an account with the card supplier and maintain some cash balance in that account. This cash balance acts as a security for the supplier of secured card. Your limit is dependent on the amount you hold in the account that you have started with the supplier of secured card. This is generally between 50 to 100% of your account balance. So in that sense, secured cards are not really cards (since they don’t offer you any really). For this reason, the secured cards are sometimes also referred as debit cards.
Why is the concept of secured cards so important?
As we know, card debt is a raging problem which is caused by improper usage of cards. Such people end up spoiling their rating to an extent where they cannot get another unsecured card (that is what we call the commonly used cards). Even after they have paid off their dues and cleared their debt, their rating still haunts them. For such people, secured cards are a boon.
Secured cards present them with an opportunity to not only get a card in the first place but also to improve their rating by using the secured card in a disciplined way (paying their dues in time, controlled spending, utilizing a maximum of 70% limit etc etc). As they continue with these good habits, their rating gradually improves over a period of time. Hence secured cards provide them with the means of rectifying their mistakes (credit rating).
It’s not just the people with bad rating who go for secured cards. Some people go for secured cards because they don’t want to bother themselves with the bills etc for cards. They don’t like to even fill-up application forms for unsecured cards.
Then there are some who just don’t like to borrow money (even if it means borrowing from a card supplier by using their card). However, such people are very rare to find.
Some people just go for secured cards because they have heard a lot of horrifying stories on card debt – maybe someone from their family or one of their friends was devastated by card debt and they don’t want to repeat the mistake. So they decide to go for a secured card.
Whatever be the reason for going for it, the secured cards are surely popular too.
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