Learn How Secured Credit Cards Work And How They Can Help You Build Your Credit With Responsible Use
There are plenty of credit card options out there. But not all of them are available if you donât have an established credit historyâor if your credit is less than perfect. There are still options, though. One could be a secured credit card.
Secured credit cards can be a great tool to help you build good credit. But before applying, it may help to learn a little about how secured cards work. Keep reading to learn more about what it takes to get a secured card, how itâs different from other cards and a few potential benefits.
Secured Line Of Credit
With a secured line of credit, you use an asset as collateral for the line of credit. For example, the asset could be your car or your home. If you don’t pay back what you owe, the lender can take possession of that asset. The advantage is that you can get a lower interest rate than with an unsecured line of credit.
Key Features And Benefits
Build credit
As long as you keep up to date with your payments, your credit rating will improve
Shop and pay online
Use it as you would any credit card: shop online, pay bills and set up accounts online
Flexible and convenient
Spend up to your deposit limit with the convenience and flexibility of a credit card
Pay for what you use
Youll only pay monthly interest when you carry a balance on your Secured Visa
Choose no fee or low interest
Choose an annual fee of $59 and 14.90% interest or no annual fee and 19.99% interest
Set your own limit
Your limit is set at the amount of your deposit and can range from $500 to $10,000
Worldwide acceptance
Visa offers a secure and reliable method of payment in 200+ countries and territories
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How To Get A Td Cash Secured Credit Card
- Apply for the card
- Apply online for the TD Cash Secured Credit Card
- Open a savings account
- Once you’re conditionally approved, you will get instructions to open and fund a TD Simple Savings account as your security deposit
- Fund your savings account
- You’ll need a minimum of $300 in your savings account to secure your card. You can use funds from another TD Bank, your debit card or an external account
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How it works
Can A Secured Card Be Upgraded To A Traditional Card
Some credit card providers have an option to transition to a traditional, unsecured credit card after you’ve shown you’re responsible with credit. If you want a card with a seamless transition pathway, look for that feature while shopping for a secured credit card.
A direct deposit of news and advice to help you make the smartest decisions with your money.
*All information about the BankAmericard Secured Credit Card and the Secured Mastercard from Capital One has been collected independently by CNET and has not been reviewed by the issuer.
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Can Secured Cards Really Build Credit
In contrast to alternatives like prepaid debit cards, all card transactions and payment activities with a secured card are reported to the major credit bureausEquifax, Experian, and TransUnion. Good financial behavior, such as staying within your and making on-time payments, has a positive effect on your credit history, and that in turn will help you build a strong credit score.
What Is A Secured Credit Card And Do You Need One
A secured credit card is like a regular credit card, except for one thing: you have to provide a deposit as collateral before you can use it.
In most cases, the amount of money you deposit represents the limit of your expenditures. So if you deposit $500, then you can spend up to $500.
Unlike pre-paid cards, which allow you to put money on your card and then spend it, the deposit is just there as collateral for the banka security that there’s always money there to pay off the card. The bank will only draw on your deposit if you fall behind on your payments.
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Pros Of A Line Of Credit
- You’ll usually pay a lower interest rate for a line of credit than for a credit card or a personal loan
- Depending on the product and financial institution, you may not be charged set-up fees or annual administration fees
- To avoid unnecessary fees, if you bank with the same financial institution where you got a your line of credit, you may be able to have any overdraft on your chequing account transferred to your line of credit
What Is A Secured Card Deposit
A secured card deposit is money you put down when you open a secured card, explains Brandon Yahn, founder of Student Loans Guy . In a sense, he says, secured cards are similar to debit cards in that you need to have cash in your account in order to make a transaction.
That may be a helpful comparison, but its important to remember that payments on your secured card arent automatically deducted from your deposit amount. Youll need to make your minimum payment by the monthly due date if you want to build a healthy credit history. Well address this more in a bit.
Secured cards vs. unsecured cards
Secured credit cards require you to make a cash deposit in exchange for a line of credit. Unsecured cards dont require this.
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What Happens After I Make My Deposit
After you make a deposit, you can start making purchases with your credit card. As with a traditional credit card, youll receive monthly statements showing the balance due. To avoid paying interest on your balance, youll need to pay off your balance in full and on time each month.
This is where secured cards can present as much of a risk as unsecured cards. You can still accumulate debt if you make purchases and fail to pay your bills on time. The amount you owe can quickly grow beyond the deposit you made, thanks to interest.
So yes, there are risks involved. But if you consistently make on-time payments, dont carry a balance and dont accrue interest, a secured credit card can be a great way to build credit.
Meet Our Credit Cards Expert
Ben Woolsey is Investopedia’s Senior Editor for Credit Cards. He has more than 30 years of experience in the financial services industry, including marketing for banking and financial institutions such as Associates First Capital and Bank One. Prior to Investopedia, he managed credit card content for CreditCards.com and Bankrate.com.
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What Is A Prepaid Secured Card
With prepaid cards, you have a fixed amount that you can spend based on money you provide up front.
However, with a secured credit card, such as the Citi® Secured Mastercard®, you can start to build up your credit history, following responsible management of your account. Your credit history will be reported to major credit bureaus.
The Citi® Secured Mastercard® also offers the features and protections – of a credit card. The Citi® Secured Mastercard® requires a security deposit if approved as part of the application process. You will still need to pay at least your minimum payment due each month.
How Do I Get One Of These Secured Credit Cards
Many banks offer a secured credit card. You can apply online, just as you would for any credit card. Youll need to provide the deposit. In cash no one will accept another credit card for this one!
Some companies require a certain amount, such as $200, for the security deposit. Look for a card that has no annual fee if possible, or at least a low one. You dont want to fork out $50 a year for a $200 credit limit!
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Why You Can Trust Bankrate
At Bankrate, we have a mission to demystify the credit cards industry regardless or where you are in your journey and make it one you can navigate with confidence. Our team is full of a diverse range of experts from credit card pros to data analysts and, most importantly, people who shop for credit cards just like you. With this combination of expertise and perspectives, we keep close tabs on the credit card industry year-round to:
- Meet you wherever you are in your credit card journey to guide your information search and help you understand your options.
- Consistently provide up-to-date, reliable market information so you’re well-equipped to make confident decisions.
- Reduce industry jargon so you get the clearest form of information possible, so you can make the right decision for you.
At Bankrate, we focus on the points consumers care about most: rewards, welcome offers and bonuses, APR, and overall customer experience. Any issuers discussed on our site are vetted based on the value they provide to consumers at each of these levels. At each step of the way, we fact-check ourselves to prioritize accuracy so we can continue to be here for your every next.
Best Secured Credit Card For No Credit Check: Opensky Secured Visa Credit Card
Overview: Unlike most credit cards, the OpenSky Secured Visa doesnt require a credit check to apply. Also, you can build your credit history quickly because the card issuer reports to all 3 credit bureaus.
Pros: No credit check is required with the OpenSky Secured Visa, which is a rarity for credit cards.
Cons: Theres an annual fee, as well as fees for foreign transactions, inactivity and garnishment.
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Upgrading To An Unsecured Card
After using your secured card responsibly for a while, your credit score should start to rise. The progress happens most quickly if you keep your balances low and make your payments on time. Once youve achieved a good credit score , you can think about shopping around for an unsecured card that might offer better rewards programs and lower fees.
When it comes to going about your upgrade, you have a few options. Some credit cards have both a secured and unsecured version. If thats the case with your secured card, you may be able to simply call the customer service line and ask to upgrade for free. Some issuers may even allow you to upgrade to a variety of unsecured cards while keeping the same account. Keep in mind that you may not be eligible for the new cards sign-up bonus if youre upgrading from a secured card.
The other option is to apply for an additional card instead of upgrading your existing account. With cards for fair credit and beyond, you have more options to explore credit cards from other issuers this way. However, your credit may take a temporary dip since the new account will decrease your average age of accounts.
Once approved for a new card, you can either keep your secured card open or cancel it. If your secured card comes with fees, such as a maintenance or inactivity fee, it may be a good idea to cancel it. Otherwise, theres no harm in keeping it open for the occasional small purchase to add to the length of your credit history .
Which Banks Offer Secured Credit Cards
Many banks and card issuers offer secured credit cards. If you have a preferred bank, consider asking whether they offer a secured credit card. Don’t apply for a card without digging into the terms and conditions, however. Look at the APR, fees, and whether you can be transitioned to an unsecured card in the future.
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Read More Citi Secured Mastercard Faqs
Where can I find the application for the Citi® Secured Mastercard®?
You can visit our webpage for this card to and click the apply now button to complete an application.
What are the benefits of the Citi® Secured Mastercard®?
The key benefit of the Citi® Secured Mastercard® is that it’s a no annual fee1 credit card that may help you build your credit when used responsibly. Unlike a debit card, this secured credit card helps you build your credit history with reporting to major credit bureaus. Cardmembers also enjoy added benefits of their secured credit card, such as:
- Using your card anywhere Mastercard® is accepted worldwide
- Free access to your FICO score online
- Tools to help you stay on track, including Auto Pay, Account Alerts, and Flexible Payment due dates
This can help you to build your credit history, following responsible management of your credit card account.
What is the initial deposit required for the Citi® Secured Mastercard®?
You can select any deposit amount between $200 and $2,500, in $100 increments when applying for the Citi® Secured Mastercard®. Your security deposit will determine your credit limit . Your security deposit is always equal to your credit limit so the larger the deposit, the larger the credit limit.
How can I apply for a Citi® Secured Mastercard®?
Take the first step toward achieving your financial goals by applying for the Citi® Secured Mastercard®. .
Is a secured card the same as a prepaid card?
Myth : You Wont Get Your Security Deposit Back; The Credit Card Company Keeps Your Money
Reality: The security deposit on your secured credit card is fully refundable you will get your security deposit money back, so long as you pay your balance in full. If you cancel your account at any time and your balance is paid off, you will get a refund of your deposit, but the timing may vary from issuer to issuer.
With the Discover it® Secured card, you also will get your security deposit back once you graduate to an unsecured credit card. Discover will automatically review your credit card account monthly, starting at eight months, to see if they can return your security deposit while you continue to enjoy your card benefits. These reviews are based on responsible credit management across all of your credit cards and loans, including Discover and others.
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Potential Benefits Of Secured Credit Cards
There are plenty of advantages to using secured cards: A secured card can give you experience using a credit card, help you improve your credit profile and help you work toward a card with better rewards or a higher credit limit.;
It may help to think of a secured card like on-the-job training you can use to move on to bigger and better opportunities.;
Use a Secured Card to Build Credit
If youâre looking to build or rebuild your credit, you can use a secured card to help yourself build a successful track record. That means doing things like paying at least the minimum payment on time each month and using your card responsibly.
Keep in mind that missed or late payments could harm your credit. And so could exceeding your credit limit.
Another fact to consider: Some issuers may not report the status of secured cards. If better credit is your goal, look for a secured card that reports to at least one of the three major credit bureaus: Experian®, Equifax® and TransUnion®.
Secured Cards Can Help You Graduate to Traditional, Unsecured Cards
Thereâs no single right time to move from a secured card to an unsecured card. When and why you decide to apply for a traditional credit card will depend on your situation and goals.;
But some credit card companies may allow you to move seamlessly from a secured card to a traditional card without closing your original line of credit. The process may even involve returning your deposit.
Secured Credit Cards: How They Work And Why They’re Easier To Get
A stepping stone to better credit cards.
If you have a limited credit history or a low credit score, getting approved for a credit card can be a challenge. There is, however, an entire category of credit cards designed for people in this situation: secured credit cards, which can actually help you build or repair your credit score.;
A secured credit card simply means that it’s backed by something else of value. In the case of a secured credit card, it’s your cash — in the form of a security deposit — which is used to pay your bill if you default. When you put cash up in advance, it’s easier for an issuer to overlook a checkered financial track record and grant you a secured credit card with a modest credit limit. Read on to learn more.
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How Secured Cards Can Improve Your Credit
When you responsibly use a secured card, making payments on time and in full, this information will be sent to the three main credit bureaus, Experian, Equifax and TransUnion, which helps boost your credit score and puts you on the path to qualifying for an unsecured card.
Payment history is the most important factor of your credit score, making it key to always pay on time. If you consistently make on-time payments with your secured card, positive information will be reported to the credit bureaus, which helps you build credit.
Discover It Secured Credit Card
Best secured card with rewards
- This card is a good fit for: Someone looking to earn significant cash back rewards as they work to build their credit score. You can get 2 percent cash back at gas stations and restaurants and 1 percent on all other purchases.
- This card is not a great choice for: Anyone looking to start with a minimal deposit. The minimum deposit required to initiate this card is $200, which is reasonable, but not the lowest available.
- What makes this card unique? The cash back rewards opportunity provided by this card is pretty much unheard of in a tier of credit cards designed for low credit scores. The best part: Discover will match all of the cash back youve earned at the end of your first year.
- Is the Discover it Secured Credit Card worth it? Theres no annual fee, generous rewards, and several credit-building features, making this a clear frontrunner in the world of secured credit cards.
Jump back to offer details.
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