I met DJ in college, we were always good friends and we trusted many things. When I was going on vacation I was borrowing my credit card to buy the plane tickets and book the hotel. He lent it without hesitation, because he knew him well, knew that he was a responsible man and managed well. One day he talked to me to ask for my card and buy a 12-month television without interest. I didn’t really like the idea, not because I distrusted him, but because I cut my available credit a lot. However, I accepted and went to buy television.
While we were looking for the television I wanted, I was encouraged to ask him why if he was a professional with a fixed income and job he didn’t have a credit card, I suspected he was one of those people who “fear” credit cards. But no, he confessed that when he was younger to impress a girl, he became very indebted and could not pay, so now his credit history was bad and no bank granted him a credit card.
Do you have a low score in the credit bureau and need a credit card?
The score reported by Credit Information Companies is a tool that rates your credit behavior summarized in a number. This number is an objective measure that estimates the risk of default assumed by a financial entity when granting a loan.
If your score is below 300, we could say that no financial institution will give you a credit card. If, on the other hand, your score is above 650 points, you have virtually any pre-approved credit.
In other words, if in the past you settled your debts without arrears, you are adding points to your rating, then you will receive offers of cards with access to lower interest, which entails a very competitive CAT, better benefits and with a more credit line high. But what options does someone like DJ have, with a low credit score?
A poorly explored alternative is guaranteed credit cards. It is a little known option because so far very few traditional banks offer this type of cards, Fintech financial institutions have expanded the offer of these products, yet they have not received a greater diffusion.
The secured credit card is a hybrid between a debit card and a credit card, as it requires a deposit equal to or even greater than the credit granted by the bank. They work for a certain period of time, which once concluded makes it possible to have a real loan with no more security deposits.
Suppose John has a low score in his credit history, he needs a credit card for $ 10,000 dollars. You can go to a bank and request a guaranteed credit card, then the bank will ask John for a deposit of at least $ 10,000 dollars. If John makes purchases for $ 2,000 (he can make all kinds of payments where VISA and Mastercard are accepted), at the end of the month, John will pay those two thousand dollars, otherwise the bank will take the money from the deposit and charge John both thousand dollars plus interest and / or commissions. These types of cards usually charge very high interest and commissions.
You can tell me that this is more like a debit card and a secured credit card has no case. They are right, it is very similar to a debit card, the main difference is that debit cards do not report to Credit Information Companies, while secured credit cards do.
Guaranteed credit cards are a product designed for people who use them to raise their credit rating and in the future can access other credits. For this reason, guaranteed credit cards are temporary; they can last up to 18 months, after that period, and if the client had a good behavior, the bank will return the deposit to the client and grant a real credit card.
Credit cards without checking Credit Bureau (guaranteed).
I found three Banks that offer secured credit cards. I make a brief list of these banks and the most important characteristics of the products they offer.
- Revolution B-Bank. In this case, the bank asks for a deposit of at least three thousand dollars and a maximum of ten thousand dollars. This bank grants credit of 100 to 130% of the amount deposited. The card becomes a real credit card after 18 months.
- Bamanex The amounts to deposit are in the range of $ 2,500 up to $ 20,000 dollars. The credit limit granted by this bank is up to 200% of the amount deposited. After 12 months of good card management, the bank grants a traditional loan.
- Savers Discovery Bank This bank grants credit for only 80% of the amount deposited, but accepts deposits between $ 5,000 and $ 200,000 dollars. It can become a true credit card in a term that varies from 12 to 24 months.
Advantages of secured credit cards.
Guaranteed credit cards are an excellent option if no one trusts you anymore, for me it is the main advantage along with the possibility of mending your credit history. You have practically the same benefits as with a traditional credit card: purchase months without interest, buy items online or make reservations for your vacation. In addition to obtaining it they do not ask you for proof of income and do not verify the Credit Bureau.
Disadvantages of secured credit cards.
The biggest disadvantage that I see is the sum of money left as collateral in the bank for a long time (at least 12 months), and for which you will not get any financial benefit. In addition, commissions and interest are often well above traditional credit cards, so you better pay payments
Did you learn the lesson?
Obviously, the most advisable thing is that from the first time you acquire a credit you will be fulfilled in your payments, but if unfortunately you failed to comply, a guaranteed credit card is a good option, especially because you will have the opportunity to show yourself and the bank that You learned your lesson and you know how to use a credit card. Anyway, go with lead feet and be extremely responsible, since with their high commissions they could make you fall in the wrong way and aggravate your problem.
My friend DJ promptly paid me the twelve payments of his television and now he has a guaranteed credit card. I hope you can soon raise your credit rating and have access to better loans, because soon you are getting married and want to buy a house.