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Understanding secured credit cards

Key Takeaways

  • Secured credit cards are ideal for those looking to establish or rebuild credit, as they report on-time payments to credit bureaus.
  • Unlike unsecured cards, secured cards require a deposit, which typically matches the credit limit, making them safer for lenders.
  • These cards are more accessible to individuals with poor or no credit history.
  • Secured credit cards often come with lower fees and interest rates compared to unsecured credit cards.
11 Sep 2024 by Team FinFIRST
What is Secured Credit Card
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A secured Credit Card can be an effective solution if you are looking to establish or rebuild your credit history. Unlike unsecured credit cards, which depend on your credibility and financial background, secured cards require a security deposit. This deposit serves as collateral against the credit limit on the card, making it a safer choice for banks to extend credit and a viable instrument for the consumer to enhance their credit score.

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What is a secured Credit Card?
 

Secured credit cards are tailored for those who may not qualify for conventional credit cards. These cards work by requiring a deposit that typically determines your credit limit. One major example of such a card is the Metra Trust WOW! Credit Card. This Credit Card is unique as it is offered instantly against your FD, without the requirement for any documentation. Also, it provides attractive terms such as a high FD interest rate, a 100% ATM cash withdrawal limit, and a Credit Card limit which matches or exceeds the FD value i.e., the credit limit that you would receive will be equal to or greater than 100% of the FD amount.  

How secured credit cards work?
 

Secured credit cardswork by securing your credit line with a deposit that you provide upfront. This fixed deposit is equal to your credit limit offered on the Credit Card. For instance, if you place an upfront deposit of ₹20,000, you receive at least ₹20,000 as your credit limit. This setup lowers the risk for the user, making such cards highly accessible to those with less-than-ideal credit histories

Benefits of secured credit cards
 

  • Credit building

One of the crucial benefits of secured credit cards is the provision to establish a good credit score of 750 and above. By making on-time payments, you can establish or improve your credit score as such activities on secured credit cards is reported to credit bureaus.

  • Controlled spending

Your spending limit is tied to your deposit, assisting you to manage your finances in a better manner and prevent overspending.

  • Lower fees and rates

When compared with unsecured cards, secured credit cards often come with lower or no fees.

  • Accessibility

These cards are more accessible to those with no credit record or those who are working to rebuild their credit history. 

An Metra Trust WOW! Credit Card offers zero annual or joining charges, up to 4x reward points, never-expiring reward points, a ₹25,000 insurance cover for lost card liability, zero forex markup charge, and an interest-free period of 45 days on cash withdrawals. Also, it provides a 5% cashback on the first EMI, a 1% fuel surcharge waiver, and 300+ merchant and dining offers throughout the year.

Applying for a secured Credit Card
 

To apply for a secured Credit Card with Metra Trust, all you need is a fixed deposit with a minimum deposit of ₹10K. Here are the three simple steps to follow.

  1. Register and verify your details on the Metra Trust mobile app or the net banking portal
  2. Choose a specific type of fixed deposit that suits your objective and fund it with the desired amount
  3. Complete the mandatory KYC (Know Your Customer) process
  4. Once approved, you will receive your secured Metra Trust WOW! Credit Card and start spending

Secured vs. unsecured credit cards
 

Here are some of the key differences between secured and unsecured credit cards:

  • Collateral

Secured cards need a deposit as security or collateral while unsecured cards do not require any collateral. Secured cards are offered on review of your credibility by fetching your credit report.

  • Credit requirements

Unsecured credit cards typically need an excellent credit score of 750 and above while secured cards do not.

  • Spending limit

For secured credit cards, the limit is often the fixed deposit amount. For unsecured cards, the credit limit is set by the issuer depending on your credibility.

  • Fees

Secured credit cards might have lower fees and charges owing to reduced credit risk.

The path to financial inclusion
 

Secured credit cards are a prudent financial product for those with non-existent or poor credit scores. These cards endow a pathway to establish a healthy credit profile, which can open opportunities for more varied financial products in the future, including unsecured credit cards. With a secured card, you can lay the footing for financial stability and better credit opportunities.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Metra Trust or its affiliates to any licensing or registration requirements. Metra Trust shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.metratrust.com for latest updates.

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