Secured Credit Cards: This is the way Students And Retirees Could possibly get A Credit Card Without An Annual Income
Applying for a credit card probably only involves the mind if you’re currently in the workforce, since there are minimum annual income requirements for many regular charge cards.
Unfortunately, there could be a group of people who still wish to benefit from the advantages of choosing credit cards, but may not quality to try to get one. These could be students, retirees, freelancers, or those whose annual income don’t fulfil the factors of the card they would like to make an application for.
For this number of individuals, there’s another kind of credit card that doesn't require any minimum income to apply. These are referred to as secured charge cards.
What Is really a Secured Credit Card?
A secured charge card requires collateral, usually by means of a fixed deposit. Banks can counterbalance the debt while using collateral in case of default, hence it's considered 'secured'. Currently, the minimum amount of fixed deposit necessary for secured charge cards in Singapore is $10,000.
The credit limit of the secured credit card is usually the same as the amount for the fixed deposit. This means should you pledge a $10,000 fixed deposit for the credit card, the loan limit will also be $10,000 unless otherwise per the financial institution.
Unsecured credit cards would be the most typical kind of credit card available for sale. The key distinction between a secured and an unsecured credit card is the requirement for collateral. Because it is not backed by collateral, the absolute minimum income is required to make sure that users possess the financial way to repay the loan borrowed through the credit card.
The credit limit for unsecured credit cards depends upon your monthly income. You can also propose a borrowing limit, that is put through approval through the bank.
Who Can Benefit From Secured Credit Cards
#1 Folks who suffer from No Income
The first group consists of mainly students, retirees and unemployed individuals who have no income. As evidence of earnings are necessary to make an application for an unsecured charge card, this group of individuals will 't be entitled to it. Students do have the choice to try to get unsecured student charge cards, but these cards normally have a $500 credit limit and limited benefits compared to a normal charge card.
#2 Working Adults Who Do Not Meet The Minimum Income Requirement
This group consists of working adults who fall into either category:
- Individuals who earn less than $30,000 per annum
- Individuals who bring home a lot more than $30,000 per annum but less than the income requirement for a greater income charge card.
For the second category, it refers to selected unsecured credit cards with higher income requirement but additionally can be applied via the secured charge card route. Examples of such cards are the Bank of China Visa Infinite and HSBC Visa Infinite. Both cards have $120,000 per annum income requirements. Alternatively, $25,000 and $30,000 of fixed deposits will suffice to try to get the respective cards.
#3 People with No Or Poor credit Score
A person without any or poor credit score may find difficulty getting approval for loans and unsecured credit cards, even if she or he meets the requirements. Obtaining a secured charge card provides a good opportunity to build or rebuild one's credit score. You can do this by charging a little amount regularly and paying down the bill on time as well as in full.
For those people who are afraid of missing payments, one way would be to set up a GIRO arrangement using the bank for their monthly credit card bill. In this manner, there will not be another missed payment. This helps set up a good payment track record with the bank.
Also Read: Guide To Understanding Your credit score (And Improving Your Credit Score)
Understand The Purpose Of Applying For A Secured Credit Card
Secured credit cards can be useful alternative should you can’t get access to regular charge cards. Before applying for any credit card, it is important that you’re clear about the purpose of applying for one. Whether it is to rebuild your credit rating in order to make the most of credit card rewards, credit cards should put you in a better budget.
