Getting a credit card without credit or bad credit is pretty tough. Credit cards are a remarkable tool to help you build a strong credit history. However, you must also have a good credit history to get your credit card approved.
A secured card is an excellent solution to your rejected traditional credit cards. Here, we’ll discuss what it means, how it can help you, and how much it can raise your credit score. We will also reveal the best secured credit cards available.
What is a Secured Card?
This is a type of credit card that requires you to provide a refundable deposit as collateral. What if you fail to pay your bills? The company holding the deposit has the right to claim it from your account towards paying off your debt. With this, you need not prove how much money you have in savings or your income during your approval process.
The deposit you provide will be the credit limit for your secured card account. For instance, if you deposit $500, your credit limit will be $500. However, it’s important to remember that not all secured cards are created equal for their fees and benefits. So it’s essential to do your research properly.
How Does A Secured Card Work?
When you apply for a secured credit card, the company will check your credit history and score. If they find that you have a strong credit history and good standing, they will not require any deposit. If their findings indicate that you don’t have a good credit standing or bad credit history, they might ask you to provide the deposit.
After you get approved for your secured card, make sure that you consistently pay your monthly bills on time. Maintaining a good payment history will help improve your credit rating and show potential creditors that you’re capable of managing credit responsibly.
Unauthorized Charges
With traditional unsecured credit cards, your liability is unlimited by default. As for a secured card, your liability gets capped at your deposit amount. So, if someone makes unauthorized charges on your card, you are only responsible for up to $500 (or whatever your credit limit is).
Can it Help My Credit?
Yes, having a secured credit card can help improve your credit rating. By allowing you to take on credit, a secured card can help boost your score and prove that you’re capable of managing credit responsibly. A secured credit card is the best way to build your credit history if you have problems getting your traditional credit cards accepted.
Making all of your payments on time will help establish yourself as a good borrower. Eventually, with timely repayments and a good credit score, you may be able to convert your secured card into an unsecured card.
Credit Utilization
Your credit utilization ratio is one of the biggest factors that affect your credit score. Secured cards allow you to keep your credit utilization low as you’re only borrowing a small amount of money against your deposited funds. This will help improve your credit score significantly.
Can a Secured Credit Card Raise My Credit Score? By How Much?
A secured card can increase your credit score by 35 to 50 points as compared to those with no account at all. It’s critical to note that this is an average and therefore not guaranteed. Your credit utilization ratio will have the major effect on your credit score. So, make sure you keep utilization low and always make your payments on time.
Finding the best secured credit card doesn’t have to be difficult. If you need to start a credit history or want to repair your credit, a secured credit card will allow you to do it in the best way possible.
A great benefit of secured credit cards is that they act just as a regular credit card and no one can tell that it is a secured card. We have analyzed dozens of secured credit cards in order to find the best. In this updated guide, you will see the best secured credit card offers at this time.
Capital One OpenSky Visa Secured Credit Card
The Capital One OpenSky Visa card is one of the best secured credit cards available today. It charges a low annual fee of only $ 35 which is very difficult to find in secured credit cards. In addition, this card can help you rebuild your credit easily and quickly. Approval for this secured credit card is almost guaranteed, regardless of your level of credit.
Card Features
With this card you get a Visa card, and a very competitive rate of interest. This enables you be to start your credit history or rebuild your credit quickly and easily. The approval process is extremely easy and the vast majority of people will be approved for this card.
There is absolutely no credit check. We also love this card because it reports monthly to the 3 major credit bureaus so you will be able to establish good credit quickly.
How Does The OpenSky Card Work?
You just have to fill your basic information and open it with a deposit of $200 to $3000. The amount that you deposit will determine your credit limit. You can deposit the funds using your debit card with no transfer fee. After making the deposit, you will receive a Visa card with the OpenSky logo. Your credit limit is equal to the amount of your deposit.
U.S Bank Secured Visa
US Bank Secured Visa Card is another option to consider. Once approved, you will fund your card using your current checking or savings. The deposit you provide will be used to open an interest-bearing savings account at U.S. Bank. This will ensure that the funds are available to pay your debt should you default.
You will be billed as with any credit card. Making on time payments for a period of 12 months will ensure that the savings account you opened with them will not be touched and you will be on your way to a better credit rating. The annual fee for this card is $29.
Merrick Bank Secured Visa
The Merrick Bank Secured Visa allows you to get a secured Visa credit card with a minimum deposit of $200 to $ 3,000. The annual fee for owning this card is $36. However, this card offers slightly lower rates than other cards at 17.99% APR. After being approved for this secured credit card you will also have access to other tools.
Merrick Bank in an effort to help you save money offers free educational tools on how to buy a home and improve your credit score. After making the payments on time and if you do not spend your credit limit, you can receive an increased credit limit. As you continue to repair your credit, you may eventually be approved for an unsecured card.
Capital One Secured Master Card
The best thing about the Capital One Secured Master Card is that there is no annual fee. Based on your credit score, your deposit amount will vary. For a $200 line of credit, your deposit could be $49, $99 or $200. As you make additional deposits, your line of credit will increase to as much as $3000.
One of the great things about this card is that it will allow you to make payments on your deposit amount as long as you pay the full amount within 80 days of your being approved. Another great feature is that this card will report to the credit bureaus, which is great to help you reestablish your credit.
Bank Of America Secured Visa
The Bank of America Secured Visa has an annual fee of $39 and a variable interest rate of 24.49%. The minimum amount needed to open the account is $300. Another great benefit to having this card is the name itself. Bank of America is widely known and respected, being the second largest bank holding company in America.
Wells Fargo Secured Visa
Wells Fargo is another big name in the banking industry. It offers a secured Visa card at the great annual rate of only $25 with an APR of 19.24%. When you apply for this card, you must provide a minimum deposit of $300. The maximum amount is $10,000. Your deposit is your credit limit. Payment amounts will not be taken from your security deposit.
You will need to make at least the minimum payment without touching the deposit money. Additionally, Wells Fargo will occasionally review your account. If you have kept it in good standing, you may be offered a unsecured card and your deposit will be returned to you.
Credit Unions
Belonging to a credit union gives you a great opportunity to obtain a secured card at some awesome rates. Most credit union cards have no annual fees and the interest rates are extremely competitive. Listed below are a few credit unions and the perks they offer.
State Department Federal Credit Union Card
The secured card offered by the SDFCU is so good, it is worth considering obtaining a membership. If you don’t work for the State Department, you can join the American Consumer Council for $5 and still join the SDFCU.
All you have to do is have used a major consumer service or product in the past 12 months. In addition to their being no annual fee, the interest rate is only 7.24%. Also, the minimum required deposit is only $250. The card bears the Visa Platinum logo.
Digital Federal Credit Union Visa
Also check out the Digital Federal Credit Union Visa card. The minimum deposit amount is a bit more at $500 but it still offers a great interest rate at 11.75% APR. Check out their website to see if you qualify to apply. Their field of membership list is extensive. It only costs $5 to join and you will have a lifetime membership.