Friday, August 19, 2022

What Secured Credit Card Is The Best To Build Credit

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Best For Travel Rewards

Using SECURED credit cards to build credit: What to know FIRST!

Who’s this for? The U.S. Bank Altitude® Go Visa® Secured Card is one of the few travel-focused secured credit cards on the market. So if you want to earn travel rewards on your purchases while building your credit, this card may be a great fit for you.

As you spend on the card, you can earn:

  • 4X points per dollar spent on dining
  • 2X points per dollar spent at grocery stores, gas stations and streaming services
  • 1X points per dollar spent on all other eligible purchases

When these points are redeemed, they are worth 1 cent per point, giving you an effective 4% back in value on dining an excellent value that even trumps some non-secured credit cards.

In addition, cardmembers are eligible for a $15 credit for annual streaming service purchases.

New cardholders must put down a deposit of between $300 and $5,000 which acts as your credit line. If you spend within your credit limit and pay your bill when it’s due, over time, U.S. Bank could upgrade you to the U.S. Bank Altitude Go Visa Signature Card, but unlike some other cards on this list, there’s no clear timeline. Once you’re upgraded, your security deposit will be returned.

The card doesn’t have foreign transaction fees, and you can choose the due date for your bill.

Alternatives To Secured Credit Cards

Unsecured cards for bad credit

Several issuers specialize in unsecured credit cards for people with bad credit, but NerdWalletgenerally doesn’t recommend them. That’s because these “subprime specialist” cards tend to charge high fees that can easily add up to much more than a typical minimum security deposit annual fees up to $99, application fees, “activation” and “processing” fees, monthly maintenance fees and so on. And unlike the deposit on a secured card, those fees are money you can’t get back. Our roundup of the best and worst cards for bad credit has more information on cards to avoid.

Prepaid debit cards

Prepaid debit cards offer convenience and are a safer alternative than carrying cash, but they don’t help you build credit. With a prepaid debit card, you “load” money onto the card, and the purchases you make are paid for with that money. Since you’re not borrowing money, there’s no effect on your credit score. See NerdWallet’s best prepaid cards.

Offered mostly by smaller financial institutions, such as credit unions and community banks, these loans are designed to help you build a good payment history. The money you “borrow” isn’t actually given directly to you. Instead, it’s held on your behalf in a savings account while you repay the loan in monthly installments. Once you’re done, the money is released to you and your credit report shows a paid-off loan. Learn more about credit-builder loans.

Personal loans

Capital One Platinum Secured Credit Card: Best Secured Card For Building Credit

Want to keep your security deposit as low as possible? The Capital One Platinum Secured Credit Card lets you establish a line of credit with a deposit as low as $49. Your credit limit is likely to be very low, compared to other secured cards-but you don’t need a lot of credit to build your credit score. You just need to use the credit you have responsibly, and Capital One’s CreditWise app can help you learn how your day-to-day spending decisions affect your credit score. After six months, Capital One reviews your account to evaluate your qualifications for a higher credit limit.

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How To Use Your Secured Card To Build Credit

Now that you understand how secured credit cards work, how do you handle one correctly? It only takes three easy steps:

  • Pay on time. While it takes months to build your credit with good payment habits, one or two late payments can cause a big drop in your score. And not only is paying on time good for your credit, it keeps you from having to pay late fees and even losing your card.
  • Pay in full. In fact, pay multiple times a month to keep your utilization ratio low because you dont know when your issuer will send your account information to the three major credit bureaus. This will also help you avoid interest charges.
  • Place a small charge on the card. Dont forget to use the card each month. If you lose your card to inactivity, you cant build credit month by month. Put a recurring reminder on your calendar to ensure that you dont forget. Or better yet, place an auto debit for a small charge on your card.

Canadas Top Ten Secured Credit Cards

3 Best Secured Credit Cards

When it comes to considering secured credit cards in Canada, you have quite an array of options to choose from. They come with different interest rates, annual fees, rewards, benefits, and minimum deposits. Here are some factors to consider regarding guaranteed credit cards, and a side-by-side comparison of Canadas top ten!

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Home Trust Secured Low Interest Visa

* Annual fee $59* Interest: 14.9%* Minimum required deposit: $500

Of the two Home Trust cards, this version is preferable for people who might be carrying a balance from month to month, because the interest applied to that balance will be lower with this card. Applicants need to have a bank account in order to apply for this card.

Who Are Secured Cards For

If you have no or very little credit history, or a poor credit history and low , a secured card can help you build credit. In fact, it may be your only option. Banks usually want to see that youve handled credit responsibly in the past before theyll approve you for a regular credit card. However, because secured card issuers have a deposit to fall back on, risky applicants are more likely to be approved.

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How Does Credit Card Billing Work

Use your credit card to pay for purchases. Each month, the financial institution that issued your credit card sends you a statement telling you how much you spent on your credit card, and the minimum amount you must pay. If you do not pay the balance shown on your statement in full, then any grace period that may apply to your purchase transactions will no longer apply and your purchases will be subject to interest charges. Cash Advances made on your Account are always subject to interest charges. These interest charges will then be added to your outstanding balance. Interest rates for credit cards are often higher than for other types of credit, such as loans or lines of credit. So its important to use credit cards carefully and pay the balance in full each month. But if you cannot pay the full balance amount, you must make the Minimum Payment by the Payment Due Date that shows on your statement.

Best Secured Credit Cards For Bad Credit

Secured Credit Cards To Build Credit: BEST In 2021!

If you have poor credit, there are two different types of credit cards you can qualify for secured credit cards and unsecured credit cards.

Secured credit cards are typically the easiest to get if you have bad credit. However, secured credit cards require a cash deposit to get started. This means you may be required to put down $200, $500 or more as collateral, and youll typically get a low credit limit thats equal or close to your deposit.

The biggest benefit of secured credit cards is that theyre typically reported to the major credit bureaus. This means all your on-time payments get added to your credit report, which can help boost your credit over time. And even though you have to put down a cash deposit to open a secured card, if you later close the account or upgrade in good standing and with a $0 balance, your deposit will be refunded.

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Secured Credit Card Basics

How secured credit cards work

A secured credit card requires a deposit of certain amount of money into a bank account, and the credit limit can be based on a percentage of the deposited amount. This deposit for a secured credit card acts as a sort of collateral, and funds are not used for regular payments. This is unlike a prepaid card which draws from the funds you deposit. Like traditional unsecured cards, secured credit cards come with APRs, so paying attention to your spending and balances can help you keep interest payments low.

Can secured credit cards help your credit?

Typically, secured credit cards can be a good tool to help you establish or build your credit, as long as you make your payments on time each month, and keep your balance low relative to the credit limit, for positive marks on your credit report each month. Some issuers may not report to any or all credit reporting bureaus, and so it is important to check the issuerâs terms and conditions. As your on-time payment history lengthens, your credit score should improve. Having a secured card will be one of many steps on your path to achieving excellent credit, and so when your credit needs grow, you will be ready to move towards those next steps.

Applying for a secured credit card
Secured credit card details

What To Watch Out For When You Have Bad Credit

The best credit cards for poor credit may not seem very attractive, but the goal is to use them to boost your credit score so you can qualify for better offers later on. But there are a few gotchas to be aware of and watch out for, including:

  • Fees: While you should strive to avoid annual fees if you can, you should also be aware that some credit cards, especially those for people with bad credit, try to charge an account opening fee or a program fee. Avoid these offers as much as possible.
  • High APRs: Watch out for high interest rates that can make carrying debt incredibly costly. In fact, if you plan to use a credit card to improve your credit, you should try to avoid carrying a balance on the new card entirely.
  • : Finally, watch out for mistakes that hurt your credit in the first place. The worst thing you can do is pay your credit card bill late, as it will have a major negative effect on your credit score, so avoid it at all costs.

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Plastk Secured Credit Card

Annual fee: $48, plus a $6 monthly maintenance fee.

Interest rates: 17.99% for purchases and 21.99% for cash advances .

Security deposit: $300 to $10,000.

Rewards: Earn rewards points on everyday purchases 5,000 sign-up bonus points.

The Plastk Secured Visa* Credit Card is one of the best secured cards for those with bad credit.

You can apply for a credit limit of up to $10,000 and can easily make payments to settle your balance using Interac e-Transfer.

Unlike traditional secured cards that offer no rewards, the Plastk Secured Credit Card offers the following perks:

  • 0% APR for first 3 months
  • 5,000 bonus points
  • Rewards points when you pay with your card
  • 25 days interest-free grace period for purchases and 3 days for cash advances
  • Referral program

You can redeem your rewards points as a statement balance or redeem them for merchandise, gift cards, travel, charitable donations, and more.

This card has a $48 annual fee. After adding the $6 monthly maintenance fee, it costs $120/year.

The low-interest-rate version of the Home Trust Secured Visa Card has a $59 annual fee that is counterbalanced by a 14.90% purchase APR.

You can apply for a credit limit of up to $10,000.

Cardholders enjoy purchase security which protects eligible items against theft or damage for up to 90 days following purchase.

Best For Military: Nrewards Secured

Best Secured Credit Card 2018
Allows upgrade to unsecured cardYes
This card does not offer a rewards program.
  • Why We Chose This Card:
  • Pros & Cons:

The nRewards Secured Credit Card is designed for service members on fixed budgets. The card is meant for users with no or poor credit, has no annual fee, and carries a low minimum deposit of just $200.

  • Requires Navy Federal Credit Union membership

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Why Using A Credit Card Responsibly Is The Best Way To Build Credit

  • Dont Have to Cost You a Thing: There are plenty of no annual fee credit cards for people with no credit or bad credit. And credit building doesnt require making purchases. Even a will help you. Thats key because loans will generally force you into debt.
  • Report Monthly to Credit Bureaus: All major credit cards report information to the three major credit bureaus on a monthly basis, usually at the end of your billing cycle. This gives you the opportunity to quickly establish credit history from scratch or reduce the impact of previous mistakes. You just have to pay your bill on time.
  • Pretty Easy to Get: The easiest credit cards to get, which are generally secured cards, offer nearly guaranteed approval. You just need to be at least 18 years old with enough income or assets to make monthly minimum payments. In other words, there isnt much standing in the way of you building credit.

Are Secured Credit Cards Good

Secured credit cards are an excellent tool to build credit when you cannot get approved for an unsecured credit card or a loan. While putting down a security deposit is less than ideal, secured credit cards give you the chance to build credit when other payment options, such as debit cards, will not.

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Secured Credit Cards Offered By The Big 5 Canadian Banks

Secured cards are offered by all of the Big Five Canadian banks, and with relatively similar features. You will find that its difficult to uncover information on these cards online, and almost all of them require you to apply in person at the branch office.

You can inquire about details at the branch nearest youand thats not a bad thing. Although were accustomed these days to be able to do almost anything online, theres something to be said for a face-to-face conversation with an expert who can talk to you about the pros and cons and details of the card for which youre applying. So take the information below if it helps you to decide on which bank youd like to visit, but know that any of these five banks will likely require you to apply in person.

How To Use A Secured Credit Card

BEST Way to Build Credit | Discover IT Secured | The BEST Secured Credit Card

The point of picking up a secured credit card is using it to build your credit score. With that in mind, you’ll want to make sure you are prepared to use the card responsibly.

You should start by using your card for small purchases you can afford to pay off right away. From there, pay your secured credit card bill in full each month to keep your credit utilization as low as you can. To build a credit history, you’ll need to use the card on a regular basis while paying it off on time each month. Since many issuers offer an autopay feature, you might consider charging a small recurring amount to your card while setting your card to autopay.

You may also want to take steps to monitor your credit score during this time. Many secured credit cards make this easy by giving you access to your credit score each month. Ultimately, your credit score should improve over time as you make on-time payments on your credit card.

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Journey Student Credit Card From Capital One: Best For Students

When looking for the best credit cards for students, the Journey Student Rewards from Capital One should be at the top of your list. Not only does the card offer a rewards rate of up to 1.25% cash back on all purchases, but it also provides a wealth of tools to help you build your credit profile.

Here are some of the best benefits of the Journey Student Rewards card:

  • Bonus rewards for on-time payments, with 1% cash back on all purchases and 1.25% cash back each month you make an on-time monthly payment
  • Access to CreditWise from Capital One, which provides free access to your credit score as well as information on how to improve credit score numbers over time
  • An automatic credit line review, so youre considered for a higher credit line after just six months
  • Eno, a virtual assistant that keeps you up to date on your balance and recent transactions, and that allows you to pay by text

These features help you keep tabs on your , which is a key component of your credit score. They also allow you to learn more about and methods of building a solid credit history.

This cash rewards credit card also has a $0 annual fee and no foreign transaction fees, so its an affordable option for college students as well as one that offers ample opportunity to build your creditworthiness.

Best Overall: Capital One Platinum Secured

Allows upgrade to unsecured cardYes
This card does not offer a rewards program.
  • Why We Chose This Card:
  • Pros & Cons:

The Capital One Platinum Secured is Investopedia’s choice for Best Secured Card due to its low fees and security deposit flexibility, allowing customers to send in their account deposits in installments rather than having to make it all at once. Capital One also offers automatic credit line increase reviews after as little as six months of responsible card use. No annual fee makes this a good entry-level card for those needing to build their credit.

  • Security deposit can be paid in installments

  • No annual or foreign transaction fees

  • Relatively low initial credit limits

  • No bonus offers or rewards program

Read the full Capital One Platinum Secured credit card review

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