As per a recent research of the Reserve Bank of India it has been observed that there has been a noticeable decline in the usage of credit cards in India. Statistics suggest that there has been a decrease in the number of credit cards being used in India. Until the year 2008 there were more than 27 million credit cards in India but in 2013 these figures dropped to 19 million in India.
An important revelation has been made by The Indian Cards Council (ICC) that the non-performing assets (NPAs) have fallen from a high rate of 25% to less than 5% in 2013 as opposed to the situation in 2008 when every fourth customer turned NPA.
Are you among those cardholders who because of a bad credit card history are unable to use credit card? Or was your credit card cancelled by the bank which issued it? Or has your credit card limit been reduced by the issuing bank?
If your answer to all above question is yes, then there is a single solution to all of them.
Secured credit card is the sole remedy….
The following article is going to assist you to understand as to how a secured credit card can be used. You will know how this alternate route can be used to shop when you don’t have cash on you or how you can enhance your credit history.
What do we understand by a credit card secured by bank?
- It is basically a credit card which is issued by a bank. A collateral deposit is made by the prospective card holder against which the card is issued. Both the card and the collateral deposit have the same credit limit.
- The bank eases the risk undertaken by it by providing a secured card. Now the cardholders have the liberty to spend money equal to the sum held by them.
- The bank secures the right to retrieve the outstanding amounts from the deposits which were made earlier in the event of non- payment of dues.
- The credit balance lying in your account and the credit history determines your credit limit. The company issuing credit card may redeem the sum in your account on various grounds like continuing defaults in the payment of dues over a period or fees for making late payments.
Factors to Be Kept in Mind While Making an Application for a Secured Credit Card
- First of all make sure that the issuer of the credit card is recognised, genuine and legally acknowledged.
- Check the amount to be deposited
- Check whether the aforesaid amount commensurates with the credit limit extended on the card.
- Also check out finance and penalty charges.
- You must inquire whether the possibility of conversion of a secured card into an unsecured credit card exists in the future or not
- Is there a provision of grace period or not in case of consistent payments made by the card holders.
- Avoid penal interests by making payments as and when they become due.
- Regular payments may even provide for the augmentation of the credit limit if such provision is offered by the issuing bank. Timely payments made never go unrewarded.
- Inquire about the interest if any offered by the issuing bank on deposits, generally this provision is subjective and differs from bank to bank.
Now the question arises as to who must avail the secured credit card facility…
- An individual having a bad credit card history or if he is denied the issuance of a regular credit card or in the event of insolvency a secured credit card is the solution. Almost every applicant will be eligible for a secured credit card one need not have a strong credit history.
- These secured cards serve as a proof the repayment capacity of an individual to the issuing banks.
- List of the advantages of a secured credit card:
- One doesn’t need to bother about the debt being incurred as one can expend an amount equivalent to the amount held by him in his account.
- These cards serve as a vital tool in reconstructing ones credit history.
Despite of being similar in many respects there is a fundamental distinction between secured credit card and debit card which separates them i.e. a secured credit card operates like a credit card with a series of payments which are to be made at predetermined intervals whereas debit card utilises the balance lying in your account directly.
Furthermore, using a secured credit card strengthens your credit profile whereas a using a debit card does not have any impact on your credit history.
Only a few companies and banks provide the facility of secured credit cards in India which include HDFC, ICICI etc. Also Axis Bank offers its customers not only secured credit card facility but also with variants like gold, silver etc.
