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Why It’s Important to Pay Your Secured Credit Card?

[Friday, May 24th, 2019]

What is a Secured Credit Card?

A secured credit card is very alike with general or unsecured credit cards. The main difference is in the secured cards’ requirement to pay a refundable security deposit of about $200-$300 beforehand. This sum serves to protect the issuer if you turn out to be a defaulter. Typically, payments are reported to one to three major credit bureaus. Furthermore, in case you pay your balance on time, in some period the creditor can offer to switch to an unsecured credit card.

Therefore, applying for a secured credit card you definitely aim to build or rebuild your credit history. That means you should be a responsible user and always meet a due date. But what if you simply forget about your payment once? And what is going to come about if you repeat this? Here’s what you are to expect.

What Missing Payments May Cause?

It all starts with your very first missed payment. As soon as it is 30 days past due, the issuer, as a rule, sends this information to the credit bureaus. Always remember that not only positive but negative data on your account activity is collected and reported as well. Moreover, you are very likely to be charged a late fee and an interest on your card balance. Thus, your credit score will be affected badly.

After that, if you continue to miss payments, starting 60 days past due the issuer may enlarge your secured credit card interest rate. You will meet a late fee and an interest again. In addition, as the reports will be kept on sending, further score worsening will occur.

At 90 days past due, along with all those things mentioned above, you tend to lose your credit card, as it may be canceled by the issuer. In this case, your deposit will be written off to pay off the existing debt and interest.

The last step of your relationship with the issuer will take place when your account will be passed to a collection agency. It can happen once it’s 120 days past due or more. It is awful but the information about collections stays on your credit report for up to seven years.

Bottom Line

As you can see, the lack of payment for only 4 months leads to horrific consequences. Not only will you lose the security deposit, but you will also completely destroy your credit history and attract continuous calls and visits of collectors to your life. That’s why you’d better avoid missing payments by all means.

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