Which Secured Card Is Right For You
There are a few things to consider when choosing a secured credit card: how much is the required deposit, how do you transition to an unsecured card and can you earn rewards?
One strong secured card option is the Discover it® Secured Credit Card, which requires a $200 deposit but comes with some good perks. You can earn rewards , there’s no foreign transaction fees and there’s no annual fee.
If you’re looking for a card that requires a smaller deposit, you might want to consider the Capital One® Secured Mastercard®. If you qualify for the low $49 or $99 deposits, you’ll still receive a $200 credit limit.
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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.
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Secured Credit Cards Vs Unsecured Credit Cards Vs Prepaid Cards
You can think of secured cards as a hybrid between prepaid cards and unsecured credit cards. Like a prepaid card, secured credit cards require money in the account before you can use the card. Unlike a prepaid card, however, the money isnt taken out of the account when you make a purchase. Instead, you use your credit line like you would with an unsecured credit card.
With a secured credit card, youll get a statement at the end of the month and your payments will be reported to the credit bureaus. That can help you build, or rebuild, a positive credit history.
Cons Of Secured Cards
- Money needed up front. It might be difficult to come up with the deposit needed to start your secured card account. If the hundreds-of-dollars down payment wont work for you, there are other cards for poor credit that will allow you to start an account without any money down an option for those in a tight situation.
- High fees and rates. As these are cards for those with bad credit, many secured options have high APRs and fees. If you apply for a secured card, be sure youre prepared to budget your spending and pay off your bills to avoid an expensive mistake.
- Lack of rewards. Though you can find them with some cash back options here, most cards for bad credit dont feature rewards. Unfortunately, secured cards are no different.
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Open Sky Secured Credit Card
- The Good: Deposits are $200-$3,000. This one tends to be more for those with really bad credit. Thats why theres no credit check and no checking account required to make the initial deposit or qualify. They report to all three credit bureaus.
- The Bad: Annual fee of $35, and look out for inactive late fees after the 12-month mark. Late fee of up to $38, but this wont matter if you pay off your balance monthly and on time. You cant graduate to an unsecured card because they do not offer one. Open Sky.
How Much Should I Put Down To Start A Secured Credit Card
I was thinking of getting a secured visa through Cap1 for $500 and a secured AMEX for $500 through USAA. Any thoughts on whether or not to just get one for $1000 or get both at $500 limits. Will a $500 card hurt my credit? I currently don’t have any credit cards nor have I ever.
7/30/2012 575 USAA FAKO 632 563 575 USAA FAKO 632 563700+ by 2014
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How Does A Secured Credit Card Work
In most respects, a secured credit card works the same as a traditional also known as unsecured credit card. Some secured cards charge an annual fee and others do not. You can use your card wherever the payment network is accepted. Your security deposit doesnt take the place of payments, so youll still need to make payments to cover whatever youve charged to the card.
If you carry a balance from month to month, youll incur interest, so we recommend paying off your card in full every month to avoid interest charges. Thats particularly true since secured cards are usually aimed at consumers in the poor or fair credit bands, and often come with high interest rates well above 20%.
Most credit card issuers report spending and payment activity to the three major consumer credit bureaus: Equifax, Experian and TransUnion. The bureaus maintain your credit reports, and the information in your reports is whats used to generate your credit score. Its wise to check in on your score from time to time.
Can You Get The Security Deposit Back
Yes, you should be able to get your deposit back with any secured credit card by paying off what you owe in full and closing the account. Some issuers may also provide the opportunity to graduate from a secured card to an unsecured one and get your deposit refunded after demonstrating responsible behavior.
For example, the Discover it® Secured Credit Card comes with such an opportunity. The minimum deposit on this card is $200 and the maximum is $2,500. Discover begins conducting monthly account reviews after seven months to see if youre eligible to graduate to an unsecured card. Note that your activity on other financial accounts, not just those with Discover, can impact your eligibility for such an upgrade.
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Do Secured Credit Cards Build Credit
Secured credit cards help you build credit since they report your credit movements and monthly payments to the three credit bureaus Experian, Equifax and TransUnion. To build credit with a secured credit card, you should make sure you make all of your monthly payments early or on time, and that you keep your balance fairly low. Most experts suggest keeping your credit utilization at 30% or below for the best credit score results.
How To Choose A High Limit Secured Credit Card
Unlike debit and prepaid cards, secured credit cards function just like traditional credit cards from a credit-building perspective. Your account standing and payment history are reported to the three major credit bureaus, allowing you to prove your creditworthiness through responsible card use. And since secured cards are typically easier to qualify for than unsecured cards, theyre a great option if you have a limited or damaged credit history and want to build good credit.
For those struggling with bad credit, a secured credit card can really save your credit. Secured cards offer a unique advantage when it comes to credit utilization. Since they require you to put down a deposit to secure your line of credit, you have a bit more control over the size of your credit limit. While unsecured credit cards assign you a credit limit based on your credit history, secured cards generally let you determine your own limit within a specified range based on the size of your deposit.
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What Is The Minimum Credit Score Needed To Get A Secured Card
There is no minimum credit score requirement for a secured credit card because your security deposit makes up for your lack of credit history or previous credit mistakes.
Some examples in which you may not be approved for a secured credit card include having an active or recently discharged bankruptcy case, unverifiable income, or a lack of funds for the security deposit. You may also fail to qualify if you have a recent foreclosure or accounts that are currently in collections or default.
If you are denied, you can contact that cards issuer and speak to a representative to explain your needs and current status. While this does not guarantee approval, it often helps you add some background information to your application, making it easier for the bank to consider your request for credit.
Rates And Fees For Td Cash Secured Credit Card
|Rates and fees|
|Annual Percentage Rate for Purchases||22.99% variable APR|
|$5 or 3% of transfer whichever amount is greater|
|Minimum Interest Charge|
|$10 or 5% of advance whichever amount is greater|
|3% of each transaction in U.S. dollars|
|Up to $40|
Need more information?
Take a look at our terms and conditions or the Personal Credit Card Agreement for TD Cash Secured Credit Card.
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What Is A Security Deposit For A Credit Card
A security deposit is a refundable deposit that serves as collateral for the secured credit card. The credit card issuer holds the deposit and only uses it if you default on your credit card balance. It’s important to understand that you can’t use your security deposit to pay your monthly credit card bill.
Generally, your security deposit is equal to your . The credit card issuer may increase your credit limit after a certain time if you make on-time payments or provide an additional security deposit. Read the specific terms of the credit card you’re applying for to find out how and when you can increase your credit limit.
If you use your secured credit card responsibly, the card issuer may offer to convert it to an unsecured credit card and refund your security deposit. Not all secured card issuers offer an unsecured option, so check the terms of the credit card you’re applying for if you’re interested in this feature.
Pay The Deposit Quickly
Many people who apply for and are approved for a secured credit card end up losing it before they even get it. That’s because they didn’t provide the security deposit. In most cases, the card issuer won’t actually open the secured card account until you pay the deposit and you usually have to do so within a certain time frame.
Losing a card because you neglected to pay the deposit can be harmful to your credit at the exact time you’re trying to build it. The application itself will likely shave some points off your score. If you get a card, those lost points are worth it because now you have a credit-building tool. But if you don’t even get the card, all you have is the downside.
Pulling together the $200 to $300 necessary for a secured card deposit can be difficult for many people. If you think it’ll take some time, save up the deposit before applying for the card, so you can fund the deposit quickly.
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Applicants With A Limited Credit History
If you haven’t used credit often before, there may not be enough information in your credit file to prove that you can be trusted. When you get a secured credit card, the credit card company will report every month to the credit bureaus whether you are paying off the card as agreed. By consistently paying your credit card bill on time and not spending more than your credit limit, you could build up a solid track record.
Here’s Why Your Credit Utilization Rate Matters
Your credit utilization rate, also known as your debt-to-credit ratio, is an important factor that helps determine your credit score.
Shown as a percentage, it represents how much credit you use compared to how much you have available to you .
So, if you have an $800 credit card balance on your Chase Freedom® and you have a $2,000 credit card limit, your credit utilization rate is 40%:
Your utilization rate matters because it makes up 30% of your FICO credit score. A good credit score can go a long way in helping you qualify for the best credit cards, such as the Blue Cash Preferred® Card from American Express for grocery rewards and the Capital One® Savor® Cash Rewards Credit Card for entertainment rewards.
Before approving your credit application, lenders and creditors also look at your utilization rate to determine how much of a risk you are. A high utilization indicates that you could be a subprime borrower who may have trouble paying back a loan or credit card bill because you already have a lot of debt, whereas a low utilization rate illustrates you’re able to manage credit responsibly.
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How Do Secured Cards Work
To give you a line of credit, lenders want to know that youre likely to repay what you borrow. In many cases, a positive credit history provides the proof that credit card issuers need. Thats why it can be difficult to get approved for a credit card with a poor or limited credit history. Enter secured credit cards.
Opening a secured account is initiated with a cash deposit, which acts as collateral rather than a balance that you can pull from to pay off your purchases. Once youve made your deposit, most secured cards act just like unsecured cards. You can use them to make purchases in person or online, and then routinely pay off those purchases with the ability to build your credit. If you dont get your balances paid in a timely manner, youll face interest charges. In the worst case scenario where you start to default on payments, only then would your issuer start to pull from your deposit.
There is one notable feature often seen with secured cards. Because you provide the card issuer with a security deposit upfront rather than getting in on your creditworthiness, youll often see issuers set your credit limit equal to the security deposit you provided. Depending on your financial flexibility, you might be able to deposit more than the minimum to get a higher credit limit when initiating. After getting started, a secured card works like any other card you have a revolving line of credit that replenishes as you make payments.
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Ask For A Product Change
After your credit score has increased, it may be a good idea to call the issuer and ask for a product change. The issuer may be willing to upgrade you to an unsecured version of the card or a different card altogether. It may be possible even if your credit isnt good yet, but youve been consistently showing good credit behavior for a year or two. Issuer loyalty often pays off.
How Do I Build My Credit With A Secured Credit Card
Using a secured card responsibly demonstrates to credit bureaus that you can manage this type of account.
If your credit score is less than 650, it is critical that you make your payments on time each month and do not exceed your credit limit. This is an excellent way to repair your credit and get your finances back on track. If you want to improve your credit score, a secured card may be the best way to do so.
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