A lot of people think secured cards were meant for those having bad credit, but that is a wrong perception. These cards are also a viable option for those having no credit history, for instance, first time card users.
Even when you have a bad credit score, you can have access to secured credit cards and rebuild your credit history to finally qualify for an unsecured card.
When you want to qualify for a secured card, you are required to make a refundable deposit with the card issuer that gives you a credit card having a credit limit that equals the amount of your deposit.
Over period of time you earn trust of the card issuer by paying your outstanding bills in time and can ask for a normal unsecured credit card.
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What Are Secured Credit Cards?
Think of a secured card as a cross between a debit card and a credit card. You make a deposit with the issuer of credit card, who in turn gives you a Master or Visa card, the credit limit of which is limited to the amount you deposited.
The basic difference between this card and a debit card is that your credit history gets reported to main credit bureaus.
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It means that having a secured card allows you to…
- If you have bad credit history: Repair your credit history that got spoiled due to bankruptcy or bad credit. Or…
- If you have no history: Build some history and showing you are a good card holder by paying your bills on time…
enabling you to get an unsecured credit card in the not too distant future.
What to Look for?
Many factors come into play while deciding the best secured credit cards.
Do they report it to the Bureaus?
Whether or not the issuer reports to the major credit bureaus. After all, whats the point of having one if your activities are not reported to the credit bureaus.
The whole idea behind getting a secured card is to either build or improve your history and score, but if it’s not being reported, you’re not accomplishing either.
Once you find a card that does get reported, you need to look at these factors:
- Fees and interest rates
- Credit limit
- Security deposit
- Additional benefits
- Approval requirements
Top 5 Secured Credit Cards
To find the best secured cards, I have done some research. I compared a dozens or so issuers and their product while keeping in mind the above factors.
I also looked at my own personal experience and how the cards I used compared to others.
And the end result is the list below which I consider to be the top 5 secured credit cards in today’s market.
1. Capital One Secured MasterCard
This popular card charges low annual fee. On making a minimum security deposit of just $49, you could get credit limit up to two hundred dollars. But it carries a high APR.
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Main Features:
- Annual fee: $29.
- APR: 22.9% (variable).
- Credit limit: $200 to $3,000 as per the deposit made.
- You do not earn any interest on the amount deposited.
2. Citi Secured MasterCard
This secured card offers quite a few of the benefits available through a normal credit card like insurance for car rentals and retail purchase protection.
However, the bank doesn’t automatically admit all applications received for this card.
Main Features:
- Annual fee: $29.
- APR: 18.24% (variable).
- Credit limit: $300 to $5,000.
- No interest payable for security deposits provided to the bank.
3. U.S. Bank Secured Visa Card
This option allows you to steer clear of monthly or up-front fees. Though the APR is quite high, you’ll stay in good shape if you keep paying your balance every month.
Additional benefit is that you earn interest on the deposit held with them.
Main Features:
- Annual fee: $35.
- APR: 20.99% (variable).
- Credit limit: $300 to $5,000.
- You are paid interest for the cash deposited as security.
4. BankAmericard® Secured Credit Card
There is no fee for activating or applying for this card. Having used it for one year, you may qualify for refund of your deposit, though you may continue using your card.
Main Features:
- Annual fee: $39
- APR: 20.24%
- Credit limit: $300 to $4,900
5. Wells Fargo Secured Visa Card
In case you can spare some cash and enhance your credit limit, you’ll find this card viable. The limit of $10,000 is abnormally high but so is the APR.
Main Features:
- Annual fee: $25
- APR: 18.99% (variable)
- Credit limit: $300 to $10,000
- No interest payable on the security deposit provided.
Bottom Line
As some of you may know, I came to the U.S. IN 2002. Of course, I had no credit history at the time, so I had to basically buy everything in cash.
But who has cash to buy a car or a house these days?…
Thankfully, I was introduced to secured credit cards soon. I got myself one from Capital One, starting with $200. That one card helped me to build a little history, and little by little I was able to get normal unsecured credit cards, followed by loans, all helping me to raise my score to around 800.
I guess what I am trying to get at is that whether you have bad or no credit history, a secured credit card can be an excellent way to build and improve your score, provided you use it responsibly and pay your bills on time, every time.
In April of 2013 I had credit scores in the very low 600’s and I was approved for a Capital One secured credit card with a $200 credit limit. I would add $100 each month until I raised my available credit to $800. During this rebuilding period I kept my credit utilization below 20% at all times, no missed or late payments. After approximately 18 months of responsible use I was approved for a Capital One Quicksilver card with a score 750+ across all 3 credit bureaus and a credit limit of $10,000. A secured credit card is an excellent financial tool to establish or rebuild ones credit with responsible use. Its like training wheels for adults with poor money management skills!
Agreed 100%, Ronald. Secured credit cards are excellent for creating credit history and raising your score. That’s how I did it.