Secured credit cards are very innovative products. They were developed in order to help people to:
- get a loan without any credit history;
- rebuild bad credit;
- qualify for a large credit.
The main security mechanism in secured credit card is a financial one. In order to open such a plastic, the person has to put security deposit. It is sort of financial guarantee the bank takes.
What the function of security deposit is
When the client opens a secured credit card he is usually not asked to present a positive credit history record. On top, it is quite easy to get such a card. The main reason for it is because the bank asks for a security deposit from a client.
When the client decides to open a secured card, he will be asked to deposit some money. This money will determine how high the credit will be. Actually, the banks open the credit line equal to the sum of security deposit.
Getting a loan requires a borrower to meet some bank requirements.
- The client has to pay at least minimum payment each month.
- The client has to pay within a given deadline. If he fails he will be fined.
If a person does not pay until the deadline, the bank will get the minimum payment sum from client’s deposit account.
Such a mechanism ensures the bank does not lose the money, and the client has an opportunity to get a positive credit score.
Security plastics were developed to teach people to use credit. They are excellent to start with if you never took the loan.
Other security mechanisms
As any other types of plastics, the secured credit cards have some technological security mechanisms. Here are some of them:
- PIN code plastics. The PIN is known as one of the most popular ways to ensure the security of a bank card. The majority of secured plastics use a PIN to secure a client. In Europe, the clients are asked to enter the PIN when they make purchases. That guarantees the person uses his own plastic.
- Signature. The plastics have to be signed. The signature is one more mechanism to ensure the safety of the money available on the card.
- Contactless technology. This type of safety mechanism is relatively new. Special encryption is used in order to guarantee the safety of the plastic. This technology is more popular in America than in the US.
These mechanisms make it absolutely secured to take the loan and to use the plastic. They make secured cards attractive financial products.