If your credit score will not allow you to qualify for a regular unsecured credit card, a guaranteed credit card may be a good alternative for you. This type of credit card provides a solution to the impasse experienced by creditors with a low credit score who want to start repairing and improving their credit viability so they can qualify for a regular credit card.
Why are credit card companies willing to offer a guaranteed credit card even to creditors with low credit scores? Well, simply because this type of credit card guarantees payment and thus lessens the credit card provider’s exposure to risks of non-payment. A condition for the approval of applications for this credit card is the applicant’s remittance of security funds, to the credit card company or to an independent third party. This fund shall act as collateral for the purchases charged on the credit card. So, if you fail to pay your card balance, the credit provider will just apply the security funds to pay off your account.
Security funds are not the only disadvantage you have to contend with when using a guaranteed credit card. The credit limit is usually limited to a few hundred dollars; which, for those with debt problems, may prove to be a good mitigating measure.
However, despite its apparent disadvantages, a guaranteed credit card still offers more convenience and facility compared to prepaid credit cards since you don’t have to make regular reloads of your own money in order to use the card.
When choosing which guaranteed credit card to use, you should compare all the benefits of the various cards available. There is one thing you absolutely must have to get the true benefit of using one of these cards. The company you choose must be willing to report your payment history to credit bureaus for purposes of improving and rebuilding your credit score. Steer clear of any credit card company that isn’t willing to do this.