Partially secured cards are gaining in popularity with consumers and lenders are beginning to make these accounts more available.
A secured card has long been recommended as a way to improve bad credit but the concept of a partially secured card is fairly new. Approval is almost guaranteed because you are prepaying the credit card in a special way.
You can obtain prepaid debit cards easily and use those to make purchases just as you can with a standard credit account.
However, those accounts are not reported to credit bureaus and cannot be used to overcome bad credit and improve your all important three digit credit score.
No Interest Charged
There is no interest charged for a prepaid card nor is there an application or a credit check. There is a small fee to purchase the card, you loan cash onto the card and can then make purchase with it instead of carrying cash.
Partially secured cards require you to put money in an account that will guarantee payment of the credit card should you fail to pay as agreed. If you deposit $300, there is $300 of credit on your secured card.
A few secured credit accounts allow deposits as high as $10,000 but these are rare. Most people who use secured credit cards do so in order to rebuilt credit or because it’s the only credit card they can get.
Partially secured cards are just what it sounds like. It allows you to deposit funds to provide partial security for that account.
These cards are specifically design for those with past credit problems who are trying to improve their credit standing.
Deposit
While a secured credit card will require you to deposit $500 for a $500 credit spending limit, partially secured cards may allow a $1000 spending limit for the same $500 deposit.
If you have years of bad credit a partially secured card may not be an option. Like any other business, credit lenders change their business offers to stay in touch with the reality of the marketplace.
Today, many consumers with bad credit are experiencing financial problems for the first time. The deeps cuts in employment have affected even those workers who have held their jobs for many years.
These are people who have paid their bills, had decent credit and then lost a job they had held for ten years or more.
The resulting financial losses damaged their credit and as a result they cannot qualify for a traditional credit card.
Another person who might be a good candidate for partially secured cards is someone who has gone through a bankruptcy in recent years, and has used a fully secured credit card for a time.
If the person exempted his home from the bankruptcy, he has been making mortgage payments and that helps counteract the bad credit caused by bankruptcy.
Those payments are not enough to allow him to qualify for a loan or credit card from a major lender but add credence to an applications for partially secured cards.
Finding the Offers
To date, a partially secured card offer is usually an offer made by a lender who wants your business. Banks such as Orchard Bank invite you to apply for a credit card.
After your application has been reviewed you may be approved for a standard credit account or may be offered an alternate account.
The bank may decline your application for their lowest APR offer but indicate they will approve a secured or partially secured card if you want to accept that as an alternative.
A few sub-prime lenders will convert your secured credit card into a partially secured account after you have made timely payment for a few months or a year. They are willing to do this to keep you as a customer.
Most consumers who apply for a secured account do so with the intention of using it only long enough to improve credit scores.
Once that is accomplished, the account holder will move his business to a standard credit card and cancel the secured account.
Summary
Partially secured cards are fairly new on the lending scene. They are an improvement over the secured credit cards of the past and a good option for repairing damaged credit ratings.
If your financial difficulties were the result of a temporary hardship rather than a long record of non-payment or late payment, this may be a great option for you.
