Upgrade To An Unsecured Card
You could also get back your deposit if you upgrade to an unsecured credit card.
To raise your chances of upgrading, it would be best if you got the unsecured card from the same financial institution where you got the secured version.
Secured credit cards are worth considering if you have no or poor credit history. But once you prove your reliability as a borrower, it helps to move on to unsecured versions. That way, you can use your security deposit to increase your investments.
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Warning Signs For Secured Credit Cards
There are some things every consumer should be mindful of when investigating secured credit cards.
First, make sure the company that issues the secured card reports activity to the major credit bureaus: Experian, TransUnion and Equifax. Most secured cards do report, but there are still a few that dont. If you are trying to establish or improve your credit score, youre wasting your time if spending and payments arent reported to the credit bureaus.
Carefully read the conditions for each card and take note of interest rate charges and any fees that could be applied. Generally speaking, the interest rates on secured cards are higher than those for traditional credit cards. Also, most secured cards have fees sometimes several fees tied to the card. Activation, annual, late payment and cash advance fees are just a few of the added charges that could change your mind about a card.
Be sure there is a grace period for making payments. A grace period starts on the final day of the billing period and ends on the due date. That time frame should be at least 21 days, with most cards offering a 25-day grace period. If there is no grace period, you will pay interest on a purchase as soon as the card gets swiped. That can be costly over the course of a billing period.
When To Get A Secured Credit Card
There are many reasons to get a secured credit card, but it usually comes down to your . This all-important number represents your rating as a consumer. If you have a poor credit rating, usually anything below 600, you will likely have trouble getting approved for an auto loan, mortgage or other financing. You may decide to sign up for a secured credit card as a way of improving your credit score before you begin the loan application process.
Having a low credit score will also affect your interest rates. You will have to pay more in interest when taking out a loan, which will make it harder to get out of debt. Signing up for a secured credit card will help you improve your credit rating, helping you lock in a lower interest rate if you decide to apply for another loan down the line.
A secured credit card is also a great choice if youre new to the world of credit. High school students, young adults, and those new to the workforce may have no choice but to sign up for a secured card as a way of building their credit score. If you dont have a credit rating, you can use a pre-paid credit card to prove to the bank or credit that you are a responsible consumer that pays their bills on time.
Maintain a good credit score by keeping your balance below 30% of the credit limit.
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Get A Higher Limit With An Unsecured Card
Unsecured credit cards, also called traditional credit cards, are better for long-term use than secured cards because they don’t require a deposit and they typically offer a higher line of credit. You can also earn rewards on purchases like groceries and gas, earn cash back and travel for free. Unsecured cards also come with additional perks for cardholders, such as travel insurance and purchase protection.
After using your secured card consistently and paying your bills on-time and in full, you’ll know it’s time to move on to an unsecured card when your credit score improves and you’re ready for a higher limit. To help you decide which path to take, we review both scenarios below.
Tips For Using Secured Credit Cards
When it comes to using secured cards, tips are much the same as those for any revolving credit account. Here are a few you can use to help set yourself up for success:
- Deposits: Make sure youâre able to fully fund your deposit within the time frame required by the card issuer. If you donât fund the deposit in time, thereâs a chance the lender may close your account.
- Expenses: Keep an eye on your spending. Your credit card may be declined if you exceed your credit limit. And if youâre paying interest, you could end up owing more than your initial deposit.
- Budgets: If you use the card only for a few fixed purchases a month, it may be easier to avoid going over your limit. And that could help you get used to using a credit card.
- Payments: Consider your monthly payment. If you pay your statement balance in full every month, you may be able to avoid interest and other fees.
If youâve never had a credit card before, have a damaged credit history or want to improve your credit score, a secured card might be the way to go. Secured cards are also one option for college students who are new to credit.
Remember, building good credit takes time. But choosing a card like a Capital One secured card could help you take steps toward an even brighter financial future.
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How To Graduate From A Secured To An Unsecured Credit Card
Secured credit card graduation depends on your credit card issuer and on demonstrating that you can be trusted with more responsibility. Credit card issuers will look at your secured credit card usage for a period of time to determine if youre managing your credit responsibly.
Whether you can graduate from a secured credit card to an unsecured card can vary between credit card issuers. With some that allow for graduation, it can take between several months to a couple years depending on a few factors, including where your credit score was when you got the secured credit card and the policies of that specific credit card issuer. With the Discover it® Secured Credit Card, after seven months, Discover will begin automatic monthly account reviews to see if you qualify to upgrade to an unsecured card and get your deposit back.*
Some secured credit cards do not offer the option of graduating to an unsecured card. Instead, you would have to apply for a new unsecured card.
How To Open A Secured Credit Card
If youre as serious about rebuilding credit as we are, we recommend applying for a UNITY Visa Secured Card.
It comes with a fixed rate, access to our How to Rebuild Credit Program and reporting to the major credit bureaus, so you can see your efforts paying off when your credit score starts rising.
You may think avoiding another credit card is the best thing to do when you want to rebuild credit, but thats not always the case. Consider opening a secured credit card. If you place limited funds on it, use it sparingly and pay it in full each month, this credit card can easily help you rebuild your credit.
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Advantages Of A Secured Credit Card
Secured credit cards operate almost identically like traditional credit cards. They are a back up when you dont have cash for a purchase. They can help you create or improve your credit history. You can use them to make payments almost everywhere. You receive monthly billing statements detailing what you bought and how much you owe. There is a deadline for payments.
The major difference is the deposit you make that actually makes the secured card secure. That deposit is not applied to monthly charges. If you make only a minimum payment, interest rate charges will apply on the balance.
Perhaps the biggest benefit is that responsible use can lead to approval for an unsecured credit card . That should be the goal for anyone using a secured credit card.
Other advantages of a secured card include:
- It is accepted anywhere traditional credit cards are accepted, thus providing the same convenience.
- It allows the card holder to build a credit history in a controlled environment. The on secured cards are usually lower than traditional cards, which should help keep spending down.
- It will help you establish a credit score if you have never had one, or improve your credit score if it needs some repair work.
- It allows you to purchase products only available online and can be used to secure reservations with hotels and car rental agencies.
- It serves as an emergency backup for those times when you dont have enough cash or a check available for an unexpected expense.
How Long Does It Take To Build Credit With A Secured Card
A secured credit card can help you build credit if you have a limited credit history or a low credit score. Either of those factors may make it difficult to qualify for a standard, unsecured credit card. When you apply for a secured card, you make a deposit to guarantee your credit line. This lowers the lender’s risk, because they can use your deposit to cover what you owe if you’re unable to make payments.
You use a secured card the same way you do an unsecured card, purchasing goods and services on the account and making payments each month. If you’re applying for a secured card, check to see that the card issuer reports your payment activity to one or more of the consumer credit bureaus . The OpenSky® Secured Visa® Credit Card, for example, reports payments to all three credit bureaus, helping you build credit across all your credit reports. Lenders will use both your credit report and credit score to evaluate your future credit and loan applications. Payment history is the most important factor in your credit score, so having a history of on-time payments on your secured card can help you improve your credit score and secure future loans or credit cards.
Even with a secured card, there’s really no quick fix to building or repairing credit. The goal with a secured card is to establish a record of on-time payments and keep your balance low. As you do so, you’re likely to see your credit improve.
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The First Progress Platinum Elite Mastercard Secured Credit Card: Best Secured Credit Card For Wide Acceptance
Overview: Because the First Progress Platinum Elite is a Mastercard, it is widely accepted, making it a great go-to card for the traveler.
Pros: This card has a new expedited processing option, which is handy if you are looking to get your new card quickly. Also, the First Progress Platinum Elite Mastercard Secured Credit Card doesnt require a minimum score or credit history.
Cons: While not as bad as others, this cards fees can be onerous. It carries an annual fee of $29 and a variable APR of 21.49%.
Read more about the The First Progress Platinum Elite Mastercard® Secured Credit Card.
Should I Keep A Secured Credit Card After I’ve Built Credit
Keeping your secured credit card open even after building a high enough credit score for an unsecured card has its benefits, especially if it has no annual fees associated with it. Not only can a secured credit card have rewards like cash back or points, but the longer you have your secured card open, the longer your credit history. Your secured card can also help to lower your credit utilization rate.
However, if your secured card has an annual fee, you should consider whether the card’s benefits are worth the cost.
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If You Want To You Can Keep A Credit Card Indefinitely
First, its important to understand that you can keep your credit card indefinitely if you really want to. As long as youre using the card regularly and keeping your account in good standing, your issuer probably wont close it for you. If you like your card and want to keep using it, go right ahead.
In fact, theres good reason to be wary of closing a credit card, even if youre not using it. Canceling a card can have a negative impact on your credit scores because youll be instantly trimming your available credit. If youre carrying a balance on other cards, your will shoot up. This could hurt the 30% of your credit score thats determined by amounts owed.
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Increase The Amount Of Security Deposit
Contact customer service or log on to your secured cards website to start the process. Provide your name, address, account number, date of birth, Social Security Number and any other information need to verify your account. Please note that some credit card issuers require that you make additional deposits, up to the maximum amount allowed, before the account opens.
Check with the issuer to make sure your deposit is within the secured cards limits. Some of the best high limit secured credit cards, such as the U.S. Bank Secured Visa® Card, allow security deposits of around $5,000. . The First Tech Federal Credit Union Platinum Secured Mastercard® also stands out, as it allows approved applicants to make refundable security deposits of up to $25,000.
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Secured Or Other Cards For Bad Credit
Rebuilding a bad credit history sometimes means accepting credit cards with high-interest rates, low credit limits, annual fees, or security deposit requirements. While these credit cards are great for proving that youve rehabilitated your bad credit habits, theyre not keepers. You can close one of these “starter” credit cards as soon as you’re able to qualify for something better. When you’re building or rebuilding your credit score, aim to qualify for better and better credit cards.
How To Close Your Secured Card
Once youre sure you want to close your secured card, heres what to do:
Dont expect to access your deposit refund right away. Some banks retain the deposit for a few billing cycles between 30 to 90 days to catch any stray charges that might appear in the interim. Wait to cut up your secured credit card until after you receive your deposit.
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Secured Cards Vs Unsecured Credit Cards Debit Cards And Prepaid Cards
When you pay for something, secured cards and other cards may seem the same. But there are some differences worth noting.
Whatâs the Difference Between Secured Cards and Unsecured Cards?
Secured cards and unsecured credit cards work similarly. The biggest difference between a secured and unsecured credit card is the security deposit. But rewards like cash back, miles or points may also be limited with secured cards.
Credit limits may differ, too. With a secured card, your credit limit may be based on the security deposit. But some secured cards offer opportunities to increase your . At Capital One, you could be automatically considered for a higher credit line in as little as six months.
Whatâs the Difference Between Secured Cards, Prepaid Cards and Debit Cards?
One big difference is that debit and prepaid cards may not be able to help you build credit. Thatâs because activity on those accounts isnât usually reported to credit bureaus, according to the Consumer Financial Protection Bureau. Prepaid cards may also lack many of the security features of a .
Another primary difference between secured cards, debit cards and prepaid cards is where the funds used to pay for things come from. Prepaid cards are usually loaded with money ahead of time, and a debit card is usually linked to a checking account. But a secured card functions differently: The credit card company provides funding that you then pay back each month.
First Progress Platinum Prestige Mastercard Secured Credit Card: Best Secured Credit Card For Bad Credit
Overview: This card doesnt require a credit history or minimum credit score for approval. Your card use is reported to all three major credit bureaus to help you build credit. Cardholders are required to put down a refundable security deposit of at least $200 to serve as the cards credit limit.
Pros: The card carries a regular variable APR of 11.49%, which is favorable for a secured credit card.
Cons: Theres a $49 annual fee, which is on the high side for a secured credit card.
Read more about the First Progress Platinum Prestige Mastercard® Secured Credit Card.
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Secured Card Vs Unsecured Card Whats The Difference
A secured credit card like the UNITY Visa Secured Card is a credit card that is funded by you. The amount you deposit for the card determines your limit.On the other hand, an unsecured card does not require you to fund it. Your credit limit for these cards is based on factors like your credit score and credit history and is determined by your lender. If you continue to demonstrate good credit usage, your lender may decide to raise your credit limit.
Another big difference between the two is that secured cards are usually easier to get. They are known as second chance cards for a reason. An unsecured credit card, on the other hand, typically requires the applicant to have a decent credit score. To qualify for a card that comes with perks, you may need a good to excellent credit score.