5 Unexpected Benefits of Secured Credit Cards

By Damian Davila. Last updated 30 March 2016. 0 comments

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"Nobody knows you when you're down and out," goes a famous blues song.

And when your credit score is bad — really bad — you'll definitely be singing the blues whenever you're trying to find financing options. (See also: How to Get a Credit Card When You Have Bad Credit)

While you may see secured credit cards as a financing option of last resort, you may be surprised by their unexpected benefits. Here are six of them. (See also: What Are Secured Credit Cards?)

1. No Credit Check Needed

This is at the top of any list of unexpected benefits of a secured credit card.

Secured credit cards are good options for those that have bad credit and are looking to avoid an additional hard inquiry on their credit histories and a potential denial. To open a secured credit card you make an initial deposit, which becomes your card's credit limit. That initial deposit can range from a couple hundred dollars up to about $5,000.

Your initial deposit is insured by FDIC and is refundable, after applicable fees, if you decide to close your account.

2. Credit History for Credit Bureaus

Young folks starting out on their own, college students away from home, people recovering from a major life event (such as a divorce or major illness), and recent immigrants may also benefit from a secured credit card, because it helps them begin or reboot their credit histories.

When you have no recent pay stubs or tax returns available, some lenders may deny your credit application because you have no proof of income. Most secured credit card companies report your activity to the three credit bureaus (Equifax, Experian, and TransUnion), so that you can start building up (or rebuilding) your credit score.

Before signing up for a secured credit card, double check whether or not the lender reports to the credit bureaus.

3. Eligible for Higher Limits

Through responsible management of your secured credit card, you can score a higher spending limit. By turning in your payments on time and paying your balance in full every month, you improve your chances of getting a higher limit sooner. (See also: How to Get the Most Out of Your Secured Credit Card)

Also, you can contact your lender to make an additional deposit and increase your credit limit. Over time, your lender may raise your limit without requiring any additional deposits.

4. Grace Period

When choosing a secured credit card, it's key that you choose one with a grace period. A grace period is the window of time, often between the end of your billing cycle and the due date for that cycle, in which you pay no interest so long as your new balance in paid in full.

While most credit cards offer a grace period, some secured credit cards don't. Without a grace period, you'll owe interest on every purchase. This would make improving your credit history tougher than it should be.

5. Accepted Internationally

Most secured credit cards are accepted as a form of payment when traveling abroad. Given the several disadvantages of travelers checks, some international travelers may be happy to know that they can rely on their secured credit cards as a payment option.

It's a good idea to read the terms of your secured credit card in order to be aware of applicable charges when using it outside of the U.S. However, there are some secured credit cards that have no foreign transaction fees and no annual fee. (See also: Secured Credit Cards with No Annual Fee)

These six unexpected benefits from secured credit cards may be a welcome surprise to those trying to rebuild their credit histories. Stay focused and remain positive. By choosing the right secured credit card, you're taking the first step towards improving your financial situation. Ready to apply? See Wise Bread's favorite secured credit cards.

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