A secured credit card is a good way to build or rebuild your credit history, until you can qualify for an unsecured credit card. With a secured credit card, if you have no outstanding balance and are in good standing, you can get your security deposit back when you close your account.
Here are some questions to consider when you’re examining your options for a secured credit card:
Do you want no annual fee and cashback rewards?
Discover it Secured Card reports to the 3 major credit bureaus to help you build or rebuild credit with responsible use. This secured credit card's variable APR is 23.49%. The minimum security deposit is $200 (up to the amount Discover approves) and your credit line equals your deposit. After 7 months, Discover will perform automatic monthly reviews based on your responsible credit management across all your credit cards and loans to see if you could qualify to transition to an account with no security deposit. You will see your FICO credit score for free on your monthly statement and in your online account. There is no annual fee.
But here's where it gets interesting. This secured credit card offers rewards: 2% cash back at restaurants and gas stations (on up to $1,000 in combined purchases each quarter); 1% cash back on other purchases. As a promotion for new cardmembers, Discover will match all the cash back you've earned at the end of your first year.
But watch out, the interest rate is high, so consider this card if you can pay off your balance in full each month.
Do you want no annual fee and a higher credit limit with a lower deposit?
Capital One Secured Card reports to the 3 major credit bureaus to help you build credit when used responsibly. This secured credit card's variable APR is 24.99%. You can receive an initial $200 credit line with a security deposit of $49, $99 or $200, depending on your creditworthiness. And if you make your first 5 monthly payments on time, you can get access to a higher credit line with no additional deposit. There is no annual fee.
But watch out, the interest rate is high, so even if you may get a higher credit limit with less security deposit, it's best to be able to pay off your bills in full each month.
Do you need to carry a balance from time to time?
First Progress Platinum Secured MasterCard reports to all 3 major credit bureaus to help establish your credit history. No minimum credit score is required for approval. This secured credit card's variable APR is 11.99%. The credit line is secured by a fully-refundable deposit of $200 - $2,000 submitted with application. Just pay off your balance and receive your deposit back at any time. There is a $44 annual fee.
This card has a low APR but it has an annual fee. If you tend to carry a balance, this card has the potential to save money overall by having a lower interest rate.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. This site may be compensated through the Advertiser's affiliate programs.
Disclaimer: The information for the Capital One® Secured MasterCard® and Discover it® Secured Credit Card have been collected independently by CreditDonkey. The card details on this page have not been reviewed or provided by the card issuer.
Disclaimer: The information for the Capital One® Secured MasterCard®, Citi® Secured MasterCard®, and Discover it® Secured Credit Card have been collected independently by CreditDonkey. The card details on this page have not been reviewed or provided by the card issuer.
Secured credit cards have some distinct benefits that distinguish them from unsecured cards.
Secured cards have a very specific target market and very specific drawbacks.
Secured credit cards are valuable tools for people who wouldn’t be approved for other types of credit, including the more common unsecured cards. They’re a way to build credit history while providing many of the same conveniences that other credit cards provide. Just like you would do before selecting any other type of credit card, though, make sure to do your research to decide which secured credit card is the best fit for you.