Credit card debts and delinquencies are the highest in recent memory. The economic recession is forcing companies to lay off workers and employees, driving up the unemployment rate. Without jobs, Americans cannot pay their mounting credit card debts. Because of this, banks have to raise interest and slash credit limits.
For cardholders with increasing amounts of debts, the likelihood of having tainted credit ratings is an all-too-familiar possibility. A bad credit history would basically erase any chance for a cardholder to apply for a new credit card or a car loan. Mortgages and refinancing options would also be more difficult.
Experts agree that unless cardholders find new ways of redeeming their credit records, consumers can expect fewer opportunities when it comes to their financial health. To prevent this, specialists recommend getting a secured credit card. This particular card type is a hybrid of a regular credit card and a debit card. Unlike ordinary cards, secured cards require a bank deposit as collateral.
Typically, the credit limit for a secured credit is equal to the amount in the bank deposit. If a cardholder were unable to pay on time, the bank would deduct the monthly minimum from the bank deposit. Best of all, the late payment will not be forwarded to the credit bureaus, ensuring that the cardholder's credit report stays clean.
According to experts, secured credit cards give consumers the opportunity to reestablish credit or establish new credit. At present, banks are starting to warm up to the idea of secured cards. Industry sources say that card firms are beginning to reinvent their policies of approving every applicant.
Experts have recently warned aspiring card applicants that card companies are becoming even more selective in giving out credit cards. With mounting losses and increasing delinquencies, banks and card issuers are trying to regain their foothold. One way of doing that, experts contend, is to choose whom to give credit cards to.
The sudden shift in practice is catching Americans off-guard. Now, most card issuers are asking applicants for their bank-account statements to verify their financial health. Even with good financial standings, consumers have noticed lower credit limits and fewer benefits.
Analysts say that in the long run, this can actually help ailing cardholders rebuild their credit histories and records. The lower credit lines limit how much consumers can charge to their cards. As a result, cardholders can get better credit scores which can then lead to lower interest, and lower payments.