![]() A burrower will want a secured credit card if their credit is too low for a normal card but still need a credit card to either build credit or pay off a purchase over months instead of all at once. They don't get that guarantee with other credit cards. The deposit exists purely so that if you default on your card, your bank is guaranteed to get it money back because they'll use your deposit to settle your debt. When you make a purchase with a secure card it comes out of the line of credit and you can choose to only make the minimum payments or the full payment. A checking account can't provide evidence you are good with paying your debts because you aren't paying any debits.Ī secured credit card is like any other credit card in that you make a purchase now and can pay it off later (with interest). The money comes directly out of your checking account for each purchase. ![]() But if product A doesn't make sense on its own, I don't think it starts making sense if you add "it can graduate into product B" as one of its features.ĭebit cards don't provide any credit, thus it can't help your credit score. I guess I could understand that as a messy but necessary workaround for dumb regulatory and administrative hurdles.īut is that really the case? The existence of that Cred.ai thing suggests otherwise-that they don't have to jump through hoops to make something "look like a credit card" in order to report it to the credit agencies.ĭepending on the bank the card is coming from, you can get the money you put down back after you cancel the account, or if the card graduates to an unsecured card. Which, I mean, okay-if they needed to jump through hoops to call it "borrowing" because that somehow makes them a separate thing than debit cards, and that somehow makes their use eligible for reporting to the credit agencies, then fine. I gave them that money in the first place. If the collateral is equal to the credit line, I don't see how they're extending me anything. It’s their money you’re still using for the credit card. Secured cards keep your money as collateral for the credit line they extend to you, but they’re still extending you a credit line. Millions of americans have bad credit and tying bank accounts closer to regular credit scores would complicate things more for them. So from the banks perspective, if they have a system in place for bank accounts already, why add another system to it?Īlso IMO you dont want savings and checkings accounts to be tied closer to credit. Its up to each business to choose what they do and dont report to.Īs it is, banks already have a different reporting system that deals with companies like early warning systems or chexsystems, which are like credit reports for bank accounts. On the other hand, things like rent or utility payments dont typically report to credit, but ever so rarely you fine someone that does. Its very common that these types of things report to credit. Some banks dont report anything to credit, be it a credit card or a car loan or a mortgage. How did we end up with a separate product-secured credit cards-as a way for us to build credit, instead of getting credit-building capabilities built into checking and savings accounts?īasically every company is allowed to choose what they report to credit. There are a lot of reasons why they are different still, though i can see your confusion. Sometimes for every dollar you put down they give you two or three dollars of credit limit.Ĭredit cards are also treated differently under the law, most of the time in ways that benefit us as consumers. Secured cards are not always a 1:1 ratio of down payment to credit limit. debit cards do not.Ĭredit cards (even secured ones) earn you rewards of some kind in most cases while it is rare for debit cards to give rewards. Credit cards can not.Ĭredit cards have a statement with a required minimum payment every month. It still follows the rules of a credit card.ĭebit cards allow you to spend more than you have by overdrafting. Here, please treat others with respect, stay on-topic, and avoid self-promotion.Īlways do your own research before acting on any information or advice that you read on Reddit. ![]() Get your financial house in order, learn how to better manage your money, and invest for your future. ![]() Banking Megathread: FDIC, NCUA, and your cash.Private communication is not safe on Reddit. Scam alert: Ignore any private messages or chat requests. ![]()
0 Comments
Leave a Reply. |