Reasons Why Financial Institutions Offer Secured Plastic Cards
As you bring to mind a mastercard or visa, the odds are you see a plastic card through which you can borrow money to pay for goods or services, and either settle the bill on a month-to-month basis by paying your bill off in full, or only pay off part of what you’ve borrowed and be charged interest relating to the rest. This is certainly how most mastercards or visa cards function, and are generally so versatile to use in today’s e-commerce marketplace that a majority of adults now carry at least one card.
It is all well and good for those with a decent history of credit, who get the chance to pick and choose from cards featuring benefits for example interest free balance transfer deals, cash return, rewards and so on. Even individuals with below average credit scores could possibly get their hands on one of the special sub-prime credit card accounts which are available, although these cards are apt to have very high rates of interest, minimal credit limitations, and little in the way of supplemental features and benefits.
But what of people with particularly bad credit scores, who can’t get acceptance for any card? This is where collateralized credit card accounts come into play. These plastic cards aren’t truly ‘credit’ cards at all, simply because you can not borrow any money using them. Before you can make use of them, you need to deposit funds into your account, which you may then spend at any establishment which welcomes standardized cards. Also as opposed to normal credit cards, you do not get charged interest charges on what you spend, but in its place pay either a flat fee to lodge money, or are charged a smallish proportion of the cash you spend.
Prepaid credit cards are a really good option for both the user and also the issuing bank. The card account owner gets to enjoy the simplicity of using plastic cards in their day to day lives, whilst the banks get to generate a profit whilst not having any of the danger linked to loaning money to folks with low credit scores.
But would it be only individuals with impaired credit ratings who can use secured credit cards? No. A lot of persons are terrified of running up large debts using a credit-based card, which it’s all too easy to do, and prepaid credit cards don’t hold this threat, letting the bearer to use plastic without being worried about debts.
These cards are also suitable for people under the age of 18, who are not legally allowed to receive credit. There is also the advantage that it is safer for youngsters to carry a plastic card than cash, which might be very easily lost or, worse, stolen.
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