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A deeper insight into the world of secured credit cards

[Sunday, July 3rd, 2011]

Life without credit cards is unimaginable today. Though consumers with an excellent to good credit score can easily avail the cards of their choice, those with credit scores that don’t talk a lot about their financial management abilities are still finding it tough to get credit cards with favorable terms. Banks and other financial institutions believe that secured cards are the best option for consumers who are either applying for their first credit card or for those who have a bad credit history.

While secured credit cards are indeed better than the unsecured ones, there are a few things that consumers tend to overlook when making their choice. There are a number of factors such as interest rate, security deposit and other fees and financial charges that vary across institutions.

As per the study by one of the firms, Mintel Comperemedia, that compares the various credit card offers in the market, the average interest rates on secured credit cards last year averaged 19.8%. In contrast, the average interest rate on the unsecured cards hovered around 15.8%. Some financial experts said that there were a few secured credit cards that charged APR in excess of 29%.

Texas bases Money Management International’s spokesperson Kim McGrigg, says that though the interest rate should be tailored in while making important decisions, it should not be the sole point of consideration while choosing credit cards. Jeff Sklar, a compliance officer with the Public Savings Bank in Huntington, Pennsylvania says that it is the fees that need to be looked into before making the choice. Ensuring all the fees are disclosed in advance is imperative, says Wayne Sanford, who owns New Start Financial, a credit counseling firm in Allen.

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