It’s not always easy to get approved for a credit card when you’re a freelancer, entrepreneur, or self-employed with an unstable income. If applying for a regular credit card did not work for you in the past, you can get a secured credit card.
This article will help you know more about secured credit cards and which banks are offering them.
What is a Secured Credit Card?
A secured credit card is a type of credit card guaranteed by a cash deposit from the cardholder. The cash deposit will serve as the collateral to cover any purchases should you miss payments. The issuing bank will hold the cash deposit while your credit card account remains active or open.
Secured credit card does not require income documents which makes it suitable for those who have no credit history. If you have a low credit score that makes it difficult to qualify for a regular credit card then, a secured credit card can help you rebuild your credit score.
How Does Secured Credit Card Work?
Secured credit cards are issued by most banks and credit card companies.The difference is that you need to open a savings or time deposit account with the issuing bank. A certain percentage of the hold out deposit will determine your credit limit.
Not sure how it is used?Just like a regular credit card, you can use your secured credit card at any merchant. It gives you the typical benefits of a credit card such as installment plans, discounts, rewards, and other perks. Has interest. . rates, fees and charges like a regular credit card.
This type of credit card requires monthly payments. Any unsettled payment will be deducted from the hold out deposit.That is why it is important not to miss any payments to avoid reaching zero hold out balance and to retain a good credit score.
How Much is the Required Deposit to your Secured Credit Card?
Typically, the minimum required deposit is Php 10,000. Then from this amount, 80% –90% will be the assigned credit limit. The hold out deposit and credit limit percentage varies per issuing bank.
Benefits of Secured Credit Card
- 100% approval – you can get approved even when you were previously denied by a regular credit card.
- You will not be required to submit proof of stable income.
- You can easily predict your credit limit as it will be a percentage of the hold out deposit. The higher your deposit amount, the higher your credit limit will be.
- Your deposit amount may earn interest if the type of account is a deposit-bearing one.
- You can build a credit history and improve your credit score.
What’s the Best Secured Credit Card in the Philippines?
There are several secured credit card options from banks such as BPI, BDO, Metrobank, RCBC, and Security Bank. There’s a secured credit card that will suit what you look for in a credit card – rewards, waived annual fee, cashback, etc.
If you’re a freelancer, entrepreneur, or self-employed with an unstable income, you can get yourself a secured credit card. Eventually, your secured credit card can give you better chances of being approved when applying for regular credit cards.