Secured Credit Lines - An Option for the High Risk Consumer
Secured credit lines are a great bet for 'naughty consumers' i.e. those with no credit history or bad credit. You are considered a credit risk if your credit rating is 500 or lower - but all is not lost! If you have been turned down by credit card companies a secured credit line may be the answer.
Secured credit lines can provide the option of credit when no other avenue is available to you. These are bank credit cards which look just like regular cards. They are imprinted with 'Visa' or 'Mastercard' so your average vendor can't tell the difference. However there is a big difference!
To obtain secured credit lines the consumer is required to pay a security deposit up-front. This deposit acts as collateral and makes supplying credit less riskier for the lender.
So, there are costs involved in obtaining secured credit lines, but is this necessarily a bad thing? Consumers who have been delinquent on their payments may well agree that their debts actually need to be secured in this way. They have, after all, gone off the rails before. Those who have had no credit dealings in the past need to understand that any money lender has the right to be cautious at the outset.
How much will secured credit lines cost the average consumer? Charges for credit cards typically range from about $99 to $500 as a deposit. You will also be charged an annual fee. Without a security deposit you won't qualify for a credit card. If you can't afford it, consider saving the deposit over a few months and re-apply.
If you are unable to come up with the money, ask your bank for a debit card as a worthy alternative for secured credit lines. These cards will allow you to withdraw from your account. So if it's only the convenience of a credit card you want, a debit card really is very similar - provided you have funds in your account. You can use your card online, at the cash register or over the phone.
Lending is at an all-time high in the United States. On average the typical American consumer owes almost 100% of their annual income after tax in mortgage, car loans, credit cards and more. This is an increase of 25% from 1992 levels! Little wonder then that secured credit lines were developed!
Ten years ago the average line of credit was $1 800, today it's around $3 500. Maybe we need to ask ourselves if we can really afford more credit? If you know you're naughty but absolutely must have a credit card, choose one of the secured credit lines.
