Timeline for I don't understand secured credit cards
Current License: CC BY-SA 4.0
13 events
| when toggle format | what | by | license | comment | |
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| Dec 2, 2019 at 15:49 | comment | added | dwizum | @Kat if they can't use the cash you put up for collateral in the same way as the cash they lend you, - just to be clear, that is basically how it works. The cash essentially goes into an escrow-like savings account, the bank can't use it or lend it out, and can't even include it when calculating their reserves - it's as if it's held by a third party. Any interest earned against the balance goes to the customer, too. The money to fund the loan comes from the bank's normal funding, not from the deposit the customer makes. | |
| Nov 27, 2019 at 20:10 | vote | accept | Thomas | ||
| Nov 27, 2019 at 10:46 | comment | added | mootmoot | Secured credit card is just another credit card product, it doesn't change the nature of the credit card services and term. | |
| Nov 26, 2019 at 21:47 | comment | added | Kat | @RonJohn I disagree. The bank does not have possession of the house, there's a risk the house will lose value, and the bank has to go through considerable effort to convert the house into cash. If you give the bank cash and they lend you some of that cash back, they have no risk. That's better collateral than a house and they're out pretty much nothing if you don't pay. The only potential drawback for the bank I can see is if they can't use the cash you put up for collateral in the same way as the cash they lend you, but even that only justifies a small interest rate. | |
| Nov 26, 2019 at 17:06 | answer | added | dwizum | timeline score: 6 | |
| Nov 26, 2019 at 14:14 | comment | added | ceejayoz | Note: Some secured cards give you a credit limit higher than your security deposit (i.e. a $500 deposit might get you a $1000 limit). In this case, the risk to the bank is reduced, but not to zero. | |
| Nov 25, 2019 at 20:43 | history | edited | Bob Baerker | CC BY-SA 4.0 |
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| Nov 25, 2019 at 20:35 | comment | added | RonJohn | There is no one APR on every secured card. | |
| Nov 25, 2019 at 20:33 | comment | added | D Stanley | @Thomas What he means is that if you pay the statement balance on time every month, then you don't get charged interest and the APR doesn't matter. | |
| Nov 25, 2019 at 20:31 | comment | added | Thomas | when trying to understand the logic, the APR is relevant :) | |
| Nov 25, 2019 at 20:31 | answer | added | D Stanley | timeline score: 3 | |
| Nov 25, 2019 at 20:24 | comment | added | RonJohn | Secured credit cards have collateral in the same way that mortgages are backed by houses. As for why the high APR? That's irrelevant if you pay your bills on time. | |
| Nov 25, 2019 at 20:18 | history | asked | Thomas | CC BY-SA 4.0 |