Semi-Secured Credit Card

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Semi-Secured Credit Card

What Is a Semi-Secured Credit Card?

A semi-secured, or partly secured, credit card requires the account holder to make a deposit before the bank can grant credit. However, unlike a secured credit card, the credit limit given may exceed the minimum deposit. As a result, the deposit helps to reduce the card issuer’s risk but does not completely remove it.

Individuals with high credit risk or those attempting to repair their credit history may benefit from this sort of card.

key takeaways

  • A semi-secured credit card requires applicants to submit a cash deposit that will serve as collateral in the event that they are unable to make balance payments.
  • Applicants are often granted credit limits that are about twice the amount of their security deposit.
  • Typically, a semi-secured card is a step up from a fully secured card, however semi-secured status is occasionally granted immediately away.

How a Semi-Secured Credit Card Works

Banks will not issue credit cards to persons who have extremely low credit scores (below 500) for a variety of reasons, including those who are just starting out or from another nation with little or no credit history; those who have defaulted on loans; and those who have gone through bankruptcy. A secured credit card works similarly to a standard credit card, with the exception that the credit line is restricted to the amount of the cardholder’s cash deposit. If the cardholder fails to make payments, the deposit acts as collateral. A secured credit card might be a good initial step for those who don’t have any credit or have a poor credit score.

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The semi-secured card is the next level up. While it still requires a deposit, it usually offers a little amount of credit in excess of the deposit amount. As a result, the credit limit on the card is higher—roughly twice the deposit. For example, a $200 deposit might result in a credit line of up to $500. The average cardholder has credit that is too excellent for a normal secured card but not high enough for a conventional card.

If semi-secured cardholders consistently pay their account minimums on time, they may be able to get a normal (non-secured) credit card in the future.

To compensate for the default risk, banks often charge higher interest rates on secured and semi-secured cards. As of October 2021, the annual percentage rate (APR) for secured cards is often over 20%, compared to a countrywide credit card average of about 15%. Furthermore, some semi-secured cards have stringent conditions, such as an annual charge on top of the deposit.

Finding a Semi-Secured Credit Card

A semi-secured card is often a step up from a secured card: As a reward for excellent financial conduct, the secured cardholder advances to semi-secured status after several months to a year. Nothing changes except that the loan limit is increased without any extra collateral being requested.

Occasionally, a card will be provided as partly secured straight away. The cardholder will most likely need to have a credit score in the fair range (600-660), as well as verified capacity to make payments. Semi-secured cards aren’t widely publicized; instead, it’s a matter of selecting a secured card and negotiating semi-secured status with the card issuer. The BankAmericard Secured Credit Card and Capital One Secured MasterCard are two cards that, upon request, will supposedly provide you with a credit limit greater than your deposit amount, either immediately or after a few months of ownership.

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6

The standard number of months that a semi-secured credit cardholder must wait before requesting an upgrade to an unsecured card.

Example of aSemi-Secured Credit Card

Assume someone who used to operate their own firm but had to shut it down and now works in retail. After a rough patch, this individual is back to paying bills on time and applies for a secured card, viewing it as a stepping stone to eventually acquiring a normal credit card and an easier method to pay for expenditures when traveling to see relatives or purchase home products online. This individual saves $300 and utilizes it to make the needed deposit. The bank offers $300 in credit on this card at a 22% interest rate.

The bank monitors the individual’s credit record and account history over time. After around six months of timely payment of the cardholder’s outstanding debt, the bank lifts the credit limit to $700 without demanding any extra deposit. Eventually, the bank may opt to provide the account user a conventional credit card with a reduced interest rate and a smaller limit. The original investment will be refunded at that moment.

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