Barbara Baker, a real estate agent was a compulsive shopaholic who blew up most of her earnings on her shopping sprees. Even before the recession hit the incomes of most Americans, she found it difficult to make both ends meet. Her possession of six credit cards with varying interest rates and huge balances only added to her woes. Thanks to the economic recession, the real estate industry lost its luster and earning a decent income became really difficult. Added to her highly reduced income, Barbara had to make payments on her credit cards which she couldn’t. As a result she defaulted on her card payments. In addition to late fee and interest fees on her card accounts, other penalty charges like over usage and penalty for late fees etc. were charged making the already bad situation worse. That was when Barbara went to Freedom Debt Relief who helped her by enrolling her into one of their debt settlement programs. In addition to helping Barbara get rid of her mountain of debt, the company also had their credit counselors be in regular contact with her to encourage her to spend less and save. Barbara has nearly settled two of her six credit card accounts and if she keeps following the same way, she might be completely debt free in another three to four years.

The other benefit that Barbara got out of the debt relief program apart from reducing her debts was that she was cured of her shop-alcoholism. She understood the need to be prudent with her spending. Since her credit was badly shot due to default in payments and also due to the debt settlement program, she needed to build her credit. Due to the nature of her work, she needed to have a credit card and she found it next to impossible to find an unsecured credit card issuer who would not charge exorbitantly high interest rates. The other option available to Barbara was to get a secured card albeit this one too had high interest rates. The positive point was that she needed to pay a security amount to the credit issuer who would issue a card usable to the limit of the security deposit. Also a secured card limit would not exceed $350 to $400 which was what Barbara could afford.

Applying for a secured card might be a safe option for anyone to build credit in case one has not built any credit and also in case one has a poor credit history. The advantages of a secured card may be that the amount one may spend would be limited and since the security deposit acts as collateral, the creditor might not activate collection calls in case of defaults. A secured card also helps one to become more responsible while spending and making timely payments. Like credit cards, a secured card would also be reported to one or all of the three credit bureaus on a routine basis. All on-time payments would also be reported. Since on-time payments would be viewed positively, there would be a positive impact on the credit scores as well.

Before applying for a secured card, it might stand in one’s benefit to find out whether the card issuer would convert the card automatically into an unsecured credit card in case one maintains a responsible and on time payment schedule. It might also be wise to find out about any annual fees and interest rate payable for the usage of the secured card and whether one’s savings account that might be used to secure the card account would draw any interest while securing the card. Shopping around for secured cards might be vital as one would be able to make an informed decision regarding a secured card which would be affordable.

Author Bio: Freedom Debt Relief

Category: Finances
Keywords: Freedom Debt Relief