Are you looking to build your credit from scratch? Or maybe you want to repair your credit after a few bad setbacks. Secured credit cards can be useful for rebuilding your credit.
The issuer will hold a deposit just in case you don’t pay your bill. This protects the issuer from losing any money. You’ll receive the deposit once you upgrade to a regular credit card or if your account is closed in good standing.
These cards are targeted for people with low or poor credit scores. The issuer reports your activity to credit bureaus, as normal, and compile credit reports to decide your credit score. By keeping your balance low and paying your bill on time each month, you can strengthen your credit.
Here are some of the best secured credit cards to have!
1. Discover it® Secured Credit Card
With 1% cash back on every purchase and a $0 annual fee, the Discover it® Secured Credit Card is a great investment to make. You’ll earn 2% cash back bonus on your first $1,000 in purchases towards gas and restaurants. They will also double the cash back earned during your first year.
Requirements for this card includes a $200 deposit upon approval. Your deposit must also equal your credit limit, which is determined by your income and ability to pay. After being a cardholder for eight months, Discover reviews your account to consider returning your security deposit.
Getting The Most From Rewards
This secured credit card makes spending money more fun by matching rewards dollar for dollar at the end of your first year. This applies to new cardholders only.
You can maximize those earnings by using the bonus categories. As mentioned, you’ll earn 2 percent cash back at restaurants and gas stations up to $1,000 in combined purchases per quarter!
Any other purchase with the Discover It Secured card earns you 1 percent cash back with zero limits.
How It Compares To Other Cards
Discover It Secured cardholders earn a signup bonus, which other cards, such as the Capital One Secured Mastercard, does not.
This card offers free access to your FICO credit scores online and a zero dollar fraud liability protection. You’d also receive U.S customer service at any time of the day or night. These are highlights in comparison to Capital One whose users only have free access to CreditWise.
With this secured credit card, you’ll have the option of selecting our own due date, as well as price protection for no additional cost! Discover offers free travel and roadside assistance as well — perfect for travelers!
2. Capital One® Secured Mastercard®
Some pros about the Capital One® Secured Mastercard® are the low opening credit lines to start. You can make a deposit of $49, $99 or $200. The annual fee is $0 (whoop!) and you can also choose your own monthly due date.
There are also opportunities for you to have a higher credit line. As long as you make your first 5 monthly payments on time, you can be considered. There is no rewards program for this card, but has a $0 foreign transaction fee that can come in handy!
Calculating Your Credit Card Limit
Getting a secured credit card should be about rebuilding your credit and the Capital One Secured Mastercard will help you do just that. As mentioned, security deposits range from $49 to $200 depending on your creditworthiness. It’s still one of the lowest beginning security deposits out here.
Determining Your Eligibility
The top requirement for the Capital One Secured Mastercard is to have a checkings or savings account. Luckily, it can be from any bank, not just Capital One. Already had a credit card with Capital One? You will need to have fewer than two Capital One credit card accounts in good standing to qualify. You also cannot have any recently discharged cards.
How It Compares To Other Credit Cards
In comparison to cards such as the U.S Bank Secured Visa card, the Capital One Secured Mastercard in targeted for people who pay their balances in full. Instead of carrying a balance on U.S Bank’s 20.99% APR, you’ll pay less in annual fees and the security deposit with this secured credit card. If you do carry over a balance at the end of the month, it’ll save to pay the $35 annual fee to ultimately lower your APR.
3. Citi Secured Credit Card
The Citi Secured Credit Card doesn’t have an annual fee, making it a top contender. With a minimum deposit of $200, this card is low-cost and low-maintenance. It’s a great option for building your credit without the fuss.
But for those with damaged credit, this may not be the best option. Approval rates are low for those with lower credit scores. This card is targeted for people building rather than rebuilding their credit.
Credit Bureau Reports
The Citi secured credit card reports your payment activity every month to major credit reporting bureaus. That includes both late payments and payments made on time. Over time, the timely payments can raise your credit score and build your credit.
Other Important Fees
Not having an annual fee is great. What’s also beneficial is the 3% foreign transaction fee being this low. But for late and returned payments, expect to fork over up to $39. The cost of balance transfers is around $5 or 3% of the transferred amount. Cash advances go up to $10 or 5% of the amount.
The Credit Score Requirement
Still asking yourself, “Should I get a secured credit card?”? Absolutely with secured credit cards like this one. It’s designed for people with poor credit to raise their score. Citi will run a credit check during the application process but the chances of being denied because of a bad score are low.
Making The Most Of Secured Credit Cards
The end goal for applying for secured credit cards should be to build or rebuild your credit. There are some secured cards with much better benefits than others but keep your financial goals in mind. Practice good credit habits consistently if you want to improve your credit health.
For most of these secured credit cards, you will need to pay your monthly bill on time and in full each month to stay on track. But that’s not always the case. Other cards offer more flexibility for your financial situation. As long as your credit utilization rate is low, you’ll be on the path to better credit in no time!
As you keep these things in mind, expect your chances of getting approved for an unsecured card in the future increase! For more help on building your credit, check out our blog.
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