Having Trouble Qualifying for Credit Cards? Try Applying for a Secured Credit Card

Credit cards have become the backbone of many people’s lives.

They allow you to spend up to a certain limit and give you a ‘free’ period before you need to pay that balance back and before your balance starts accruing interest.

They also allow you to do things like hold a deposit against a rental car which can be trickier (or impossible) with debit cards, depending on your banking institution.

To be eligible for a credit card you need a good credit history. You can build one up by paying all your bills on time, having long term credit cards and meeting all your payments for a loan. If you miss a payment on any of these items, you get a negative mark on your credit history that can take years to disappear.

For anyone with a poor credit history, or simply no credit history at all, it can be difficult to qualify for a credit card. In this case, you can opt for a secured credit card which will allow you all the benefits of a credit card, and build up your credit score at the same time.

Secured vs. Unsecured

Most credit cards are unsecured, meaning there is no asset listed against the card and you can draw down any amount the bank deems appropriate during your initial application.

Secured credit cards, on the other hand, require you to put down a cash deposit, and in most (but not all) cases the amount you put as a deposit will be set as your credit limit. Some institutions will offer a higher limit, and some will offer interest on your deposit, so check the fine print to see what suits you.

Credit Reporting

The number one draw of a secured credit card is to rebuild your credit score so you can get better financial products. There are three major credit bureaus in the United States. A card that reports to all three credit bureaus will increase your score quicker, while a card that doesn’t report to anyone won’t increase your score at all.

The Downsides

As mentioned, all secured credit cards require you to pay a deposit. When you’re in a financially tricky situation, it can be hard to find the funds for this. Search for a card with a lower starting deposit, and keep in mind that many institutions will let you add to this amount moving forward.

As with all banking products, there are fees to watch out for. If you aren’t careful in choosing your company you can end up paying fees that wipe out you deposit within a few short months. Steer clear of application fees wherever possible, and if you do choose to pay them make sure the benefits of the card outweigh the initial buy in costs.

Lastly, most secured cards will charge higher interest rates and offer minimal rewards. This means that secured cards aren’t a long-time financial product, but something that can be highly useful in the right circumstances.

While there are many downsides and your credit line is limited by the amount you can deposit, secured credit cards are an excellent tool for getting back on your feet, or taking your first steps into building a credit score.

What You Need to Do After Graduating College and Moving into the Real World

So you just got that diploma and are making your way into the ever-so-deeply-feared “real world.”

You might be excited. You might be terrified. You might be depressed. Or, you might be a weird combination of all three and a bunch of other emotions.

I was there once.

I had a mixed bag of emotions. I was pretty upset that I was leaving my “glory days” of college. You might know what I mean. Probably (okay, definitely) a little too much drinking, the freedom to do whatever you want most of the day, and unlimited entertainment all over campus.

Though I missed these things, there’s always a time to grow up and move on. Though I was able to make new friends as I moved and found plenty of things to do, there was one thing that I wasn’t too sure about – money.

I did a decent job at managing my money in college, but never really had a budget or watched it too closely.

Now I had to pay way-too-expensive rent, figure out how to start saving my money instead of blindly spending it at the bar, and learn the ins and outs of money.

I decided to put this article together to go over some basic first steps you should take to help you as you make the transition from college to the “real world.”

Step 1 – Make a Budget

As I mentioned, I never used a budget in college. I simply looked at how much money I had and tried not to blow it all too quick.

Now that I had less support from my parents and a lot more expenses, I knew it was time that I needed to start budgeting.

Though I won’t go too in-depth about budgeting here, you should at least start by writing out all of your sources of income and all of your expenses. Start out by subtracting your necessities from your income (rent, food, utilities, student loan payments, etc.), then see how much you have left for the nonessential things such as drinks on the weekend, cable, etc.

I have found that the 80/20 budget works really well for me. To learn more about this, check out my last post.

Step 2 – Start Paying Down Student Loan Debt

After you graduate you typically have 6 months before you have to start making payments on your student loans. if you have private student loans, this may not be true, and you may actually be already making payments.

Regardless of what kind of loans you have, if any, it is imperative to figure out how you are going to repay your loans. There are all kinds of repayment plans and options for those with student debt – both those doing well and those struggling.

Figure out what kind of loans you have, their balances and interest rates, and minimum monthly payments. Next, research some of the different student loan repayment options that you have.

If you have a great job and good credit score, you might want to consider refinancing your student loans to a lower interest rate.

If you are struggling to afford your payments, consider going onto an income-driven repayment plan that limits your payments to a proportion of your income.

Step 3 – Start Saving & Investing

Most people leave college with high amounts of debt and no savings. If you were somehow able to save money in college, props to you. I know I wasn’t and it wasn’t until I had a real job that I was able to start saving some money.

When you create your budget, see if you can make some room to set money aside for savings. At first, just building up some money in your bank account should be sufficient.

Once you have built up a decent amount of money, you might want to consider looking into a retirement plan such as a 401k or Roth IRA. Many employers offer these plans to employees and some even match contributions.

Final Thoughts

There are tons of things that will change after graduating college. You will make new friends, possibly lose some friends, and will experience so many new things. The one thing you shouldn’t have to stress about, though, is your money.

Do your research, make a plan, execute it, and you’ll be just fine. There are always options if you are struggling and tons of technology out there to help you along the way.

You may not know exactly what lies ahead, but that’s okay. You are still young and have time to make mistakes and learn, so go out there and start living!

 

The Easiest Budget Known to Man: the 80/20 Budget

Budgeting can suck.

I have tried budget and budget and end up just abandoning most of them. Usually, they are just too damn complicated.

This is why I moved onto the 80/20 Budget – what I believe is the simplest budget known to man (aside from no budget, of course).

How the 80/20 Budget Works

The 80/20 Budget is almost too simple. It only includes 2 categories. Here is how it works:

20

The 20 part of the budget is what put towards savings. You should automatically take this money out of your paycheck and other forms of income so you know that this money is hitting savings. 20% really isn’t that much but if you don’t make absolutely sure that you are putting this money aside, there is a good chance you might end up dipping into it when you’re not supposed to.

Note: 20% is only a guideline. You don’t have to only save 20%. Feel free to save as much as you want – this is just a general recommendation.

80

So what’s left for the remaining 80%?

Well…everything else!

That’s what makes the 80/20 Budget so great – you only have 2 categories that are both very simple.

The 80% includes rent, food, clothes, utilities, and everything else you can spend that hard earned money on.

If you aren’t too big on tracking where every dollar goes, you may find that this budget works for you. As long as you aren’t late on rent, miss your credit card payments, or anything like that, then you should be fine.

Just take out the amount you have designated as savings from your checking account and leave the rest. If you can keep it positive, then you are doing alright! If not, you may want to set up a few more categories (such as necessities and luxuries) to track your spending a bit better.

Last Word

I really love the 80/20 Budget. It is the first budget that I have been able to stick to and don’t feel restricted by.

How about you? What kind of budget do you like to use?