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If you belong to any of the categories mentioned above, don’t lose hope, you can still easily get a credit card. Yes! you can get a secured credit card even if you don’t have a credit history or a weak credit score. These tools work just identically the way conventional credit cards do; the only difference is that they are issued without considering one’s creditworthiness.
Secured credit cards are issued by banks and various financial institutions on the basis of a security deposit that acts as collateral. If you fail to repay your outstanding financial obligations then in that case your security deposit will not be refunded. Furthermore, most of the banks offer the option of upgrading your secured credit card to a normal credit card, once you fulfill the eligibility criteria based on creditworthiness.
If you are confused and unable to decide whether you should go for secured credit cards or not you’ve landed at the right spot. In this blog, we will shed light on the major pros and cons of secured credit cards in the UAE. Moreover, we will share some crucial tips that will help you to use your credit card responsibly that will reduce the chances of debt accumulation.
First of we’ll look up at the merits of secured credit cards in the UAE, here’s a rundown-
The primary feature of secured credit cards that makes it different from other conventional credit cards is the eligibility criteria. The applicant can obtain a credit card by simply depositing a security deposit that helps the financial institution to reduce their credit risk substantially. The deposit remains with the bank till the time cardholder surrenders their card back to the bank with all dues settled.
However, if the user is unable to repay the credit card bill, the bank is free to liquidate the deposit to recover its funds. This feature of secured credit cards makes them easy to obtain as there is no bar of income, occupation, credit history, or score as it is in the case of conventional credit cards.
The simplest way to build a credit history/score is by getting and using a credit card. Once you start repaying your financial obligations on time it will be reflected in your credit score automatically, building a good credit history. If you don’t have a credit history you can apply for a secured credit card and later upgrade your card to a normal one by fulfilling the eligibility criteria of credit score. In other words, it can be said that secured credit cards are simple yet effective tools when it comes to building or improving one’s credit history.
The collateral deposited by the applicant to the financial institution is used only in the case when the outstanding balance of the card is greater than the total deposit amount. Even in that case, the bank will first issue notices via email, post, telephone to notify you about the defaulted payments. If you make the payments timely your deposit is safe and can be retrieved at the time of closure of the card.
Some of the major demerits of secured credit cards are as follows-
When compared to normal credit cards, the options, and choices offered by those who are quite diverse and vivid. The majority of credit card providers and banks issue cards from different categories that provide deals and offers on that particular category which is not the case with conventional credit cards. For ex: People willing to apply for a credit card can apply for a category-specific card such as travel cards, fuel cards, air mile cards, shopping cards, etc.
One of the major demerits of secured credit cards is that there is a lock-in period over the security deposit which is applicable until the closure of the card. In order to retrieve your security deposit, you need to surrender your current card along with no dues clearance followed by which the provider will process the refund of your deposit. Before completing all the formalities, it is not possible to apply for a refund of deposit.
In a Nutshell
With this blog, we’ve tried to encompass all the major merits and demerits of secured credit cards so that you can make the right choice of credit cards in the UAE.