Pick Your Best Secured Credit Card and Use it Wisely
Secured credit cards can be useful tools to repair your credit. Learn how to best use them to help you get back on track if you’ve had trouble getting an unsecured card.
Before the issuing bank will give you a secured credit card, you must pay a deposit equal to the available credit. This deposit will protect the bank in the event you default on the payments.
You can build a good credit history with your card by making timely monthly payments and keeping your monthly revolving balance at 30% of the credit limit or below.
The Most Popular Best Secured Credit Cards
- Capital one secured MasterCard
- USAA secured card platinum Visa
- Open Sky secured credit Visa card
- Citi Secured MasterCard.
How Do Secured Credit Cards Work?
A secured credit card is like a driver’s permit. It allows you to first master navigating the credit card universe. This prepares you to advance to the next level: an unsecured credit card.
Unlike a debit card, your secured credit card shares your activity, such as your monthly payment history and balances, with the major credit bureaus. With sustained favorable reports from a secured credit card, you may be able to upgrade to an unsecured credit card, which doesn’t require a deposit.
There are some cases where the deposit is saved in an interest-earning account, but this shouldn’t weigh heavily in choosing the best secured credit card for you.
How Much Do You Need to Deposit?
This often depends on the on the card issuer: The Wells Fargo secured card requires a deposit of at least $300, while the Capital One secured Mastercard requires a $200 minimum deposit.
Don’t fret if you can’t afford these deposits. There are some card issuers that allow you to pay the deposit in installments. Depending on your financial situation, these deposit requirements will determine which card makes sense to you.
Can I Get Approved for a Secured Credit Card?
Approval will often depend on criteria other than the deposit. For instance, Capital One requires applicants to have a working bank account.
There are other cards with a higher likelihood of acceptance. These issuers generally don’t check your credit and do not require a bank account.
What Are The Drawbacks of a Secured Credit Card?
- May have an annual fee
- Higher APR than an unsecured card
- Requires a deposit
Use this simple interest calculator to find out the costs of using your unsecured credit card.
Why Many Secured Cards Have Higher APR Than Unsecured Cards?
The issuer views a customer who is not creditworthy as a higher risk, and because of this risk, the customer must pay a premium in the form of a higher APR.
The best way to deal with this setback is to keep your utilization ratio low. For instance, your card has a $1,000 limit. You can keep your credit balance to lower than $300. This ensures you below the 30% utilization mark.
Emergencies do occur, though, so you may be pressed into exceeding this limit. So to be safe, pick a card with the lowest interest rate possible.
Tips for Using a Secured Card Wisely
Your secured credit card has arrived. You are excited and want to begin building good credit. Just before that, read these tips.
- Use it for small purchases.
- Never pay just the minimum payment.
- Set payment alerts.
- Enroll in auto pay.
