Transcription
Hey guys, what's up? It's Baby YouTuber Jaya. Welcome back to my channel. We talk about all things money, finance, and entrepreneurship.
Guys, in today's video, we are going to be talking about how to increase your credit limits using secured credit cards. When you apply for your very first credit card, you are considered a high-risk borrower, especially when you're 18, 19 years old. You don't have the length of credit history to back up the fact that you're going to be responsible with this credit card. So, credit card companies normally start you out at about a $300 to $500 credit limit, and it is really hard to get approved for credit line increases. And when you apply for other credit cards, it's going to be really hard for them to approve you for higher limits if all your other credit cards have low limits as well.
So, in today's video, we are going to be talking about how you use secured credit cards to bypass the getting approved for only lower credit limits. But before we jump into today's video, if you have any money, finance, or entrepreneurship-related questions, send it in about a four to six-sentence email to askjl101@gmail.com. Make sure you give this video a like because it substantially helps out my channel, and without further ado, let's jump into today's video.
So, starting off, what is a secured credit card? So, a secured credit card has the same functions as a regular credit card, but the only difference is that when you apply for a secured credit card, instead of the bank lending you money, you give them a deposit. This deposit can range anywhere from $50 to $2500, and the bank uses this as collateral, just in case you don't make your payments like you would on a regular credit card. So, when you apply for a regular credit card, the credit card company picks your credit limit based off of your overall credit portfolio, or lack thereof, which explains why if you don't have any credit, they give you a really low limit because they have nothing to base it off of. So, how are they going to know that you're going to be responsible with this credit card?
I'm going to let you all in on a little secret, okay? I think of credit card companies like the mean girls in high school. You know how in high school when somebody said something about you, and then the other person, they told somebody, and they were like, "Oh, well, that's how you feel about that person." "Well, that's how I feel about that person too." That's how I feel credit card companies are. Because let's say, for example, you go and apply for a Discover card, right? And Discover gives you a credit limit of $500. Then you go apply for Capital One, and Capital One pulls your credit, um, credit portfolio, and they're like, "Oh, Discover only gave her $500." Well, I'm going to give her $500 too, because why would if they only trust her with $500, I'm not going to trust her with more money so she can run off with my money? I promise you, I promise you, that's how they think. I promise you, that's how they are in my brain. They fake, okay? Nobody wants to go out on a limb.
So, it is very, very hard for you to start getting approved for higher limits when you have low limits of $500, $300, $700 on your credit report. So, when you use secured credit cards, you technically are choosing your own credit limit. For example, let's say you went and applied for a Capital One card and you got approved for a credit limit of $300. That's your credit limit, $300. Versus if you went and applied for the Capital One secured credit card and you gave them a deposit of $1000, your credit limit is now $1000. Think about how that looks on your credit report: $300 versus $1000.
Starting off at step one. Step one is going to be the step that you're going to hate me for, but it is okay because it is the most important step out of all the steps. So, number one is to save $2500. I know, I know, I know, I know. The reason why you're going to save $2500 is, you guessed it, you're going to use that as your depo. Rude. Anyways, the reason why you were going to save $2500 is because you're going to use it as the deposit on your secured credit card. Now, if you decide you want to do less, you only want to do $1000, you only want to do $2000, that is truly up to you. I definitely do not recommend you going under $1000. That's kind of what is going on outside. That's kind of redundant to what we're trying to do here. We're trying to get out of the $100 credit limit, so I don't recommend you go under $1000. I said $2500 because that is the most you can contribute to the Discover it secured card, which is the secured credit card that I recommend for you doing this because you get cash back benefits. Amazing. But I don't recommend you go under $1000.
So, after you've saved up your $2500, you're going to open up your secured credit card. And I recommend you use the Discover it secured card because it has cash back benefits, like I just said, and overall, it's just a really good card. I have the Discover it unsecured card. I never went through the secured route. I wish I had because I'm stuck at this credit limit, and I just feel like I deserve better. But anyway, that's a different story for a different day. But the Discover it secured credit card, I've heard lots of good reviews. Whenever I watch a YouTube video about secured credit cards, that's one of the cards that they're talking about.
So, step three is going to be to use that secured credit card responsibly. I don't know if I said this, but with secured credit cards, in about six to 12 months of you using the card responsibly, paying, making your payments on time, not going over 30%, just being a responsible user of the card, the bank will give you your $2500 back. So, you'll have your $2500 back, and you'll also have the credit card with the credit limit of $2500. That's very important that they give you the money back. It's important that they give you the money back because step four is going to be, y'all are going to hate me for this one, to save another $2500. I know it sounds crazy, but we're trying to build our credit, and these banks are not going to approve us for anything on our own, so we kind of have to go and get it ourselves. Like I was saying before, if you don't want to do $2500, that's too much, you want to do $2000, you want to do $1500, you want to do $1000, don't go under $1000. But you want to do right at $1000, that's completely up to you. But I suggest doing the maximum amount because you're going to get there quicker.
So, after you save another $2500, you're gonna put that money away. And when the bank unsecures your credit card and they give you the $2500 back, you're going to take the $2500 that you saved and they're going to take the $2500 that they gave you back, and you're going to open another secured credit card for $5000. So, you'll have two credit cards. You'll have one with a credit limit of $2500, and you'll have another one with the credit limit of $5000. You could do more. You could go more. You could be like, "You know what? I'm gonna ball out and save another $5000." And then take the $5000 because they're gonna give you your $5000 back. So, you'll have a $5000 secured unsecured credit card, and then you'll just have $5000 in the bank. They kind of like holding it for you in a savings account. Well, not kind of, that is what they're doing. They're holding it for you in a savings account. And then once you've shown that you are responsible, they're going to give you the money back and unsecure your card. And like I was saying, you can save up another $5000 and then take the $5000 that they unsecure and put it together and get a $10,000 card. It's all up to you.
But once you have the $2500 card and the $5000 card, you're good, you're set. You can start applying for other credit cards, and you will pretty much get approved for high limits, $5000 or more. Not anything less than $2500 if they don't approve you for anything $5000 or more. So, I do realize that this will take time. It may probably take you a year. It shouldn't take you more than two years. Two years only because you have to wait for them to give you the money back. But this is a really good base, especially if you're watching this video at 18, 19, 20 years old. If you start off with this, you are setting your credit. You are setting your credit portfolio up for success. When you have like, when you're messing with like the $500 limits and the $300 limits and you're trying to get a credit line increase, especially now, I don't know if it's because of the pandemic, but these credit card companies are acting really, really stingy. Like they do not want to give you a credit line increase. Like I don't know why, but they just don't.
So, I definitely understand that this method can take a little bit of time, but it is definitely worth it considering the fact that you don't have to wait for credit cards to approve you for higher limits or hope that they will give you a credit line increase. So, it is definitely worth it if you want to start off your credit portfolio on a on a high note.
Thank you so much for watching. Make sure you give this video a like, like I said in the beginning, it substantially helps out my channel. Make sure you comment down below. Just comment anything you want. Tell me what's your favorite subject. Do you like money, finance, or entrepreneurship? And last but not least, make sure you subscribe because why wouldn't you want to subscribe? We're talking about credit. We're talking about building our credit. We're talking about saving money. We're talking about entrepreneurship. I don't know if you see my last video, but we're talking about careers. We're getting our careers right, okay? Period. Make sure you like, comment, subscribe. In the meantime, stay strong. Bye guys.