Nearly 30% of Americans have bad credit.
This number doesn’t account for people without any credit.
Poor or nonexistent credit scores can make life difficult, especially when it comes to opening new credit accounts. Most people with bad credit are simply ineligible for competitive credit cards!
However, there are still plenty of cards out there suited to individuals with lower credit scores. Secured cards, in particular, offer a great opportunity for both building credit and enjoying greater financial freedom.
What are the best secured credit cards for bad credit? We answer this question and more in this post.
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What Is a Secured Credit Card?
If used wisely, secured credit cards can be excellent financial tools, especially for people with nonexistent or poor credit! In fact, they are designed specifically for individuals who need to build credit but lack a competitive score.
A secured credit card requires users to put down a cash deposit before they can actually use the card.
This deposit typically starts at $200 and is theoretically traded for a credit limit, the maximum amount you can borrow when using your card. With most secured credit cards, the amount of your deposit is equivalent to your credit limit.
This deposit is refundable. You’ll typically get your cash back once you are eligible to upgrade to an unsecured card, one that does not require a cash deposit for use.
You also have to leave your account in “good standing” to get your deposit back. You can achieve good standing by always paying your bill on time and being mindful of your credit utilization.
If you don’t pay your bill, the credit card issuer holds onto your cash.
Secured credit card issuers will report your credit usage activity to credit bureaus. This means that you can build good credit quickly if you are a diligent borrower.
What Qualifies as Bad Credit?
The three credit bureaus, TransUnion, Experian, and Equifax, all calculate credit scores slightly differently. This is because each has its own model for credit reporting purposes.
Most consumers will check out their FICO or VantageScore Solutions credit scores. In fact, a lot of credit card companies enable users to view their FICO scores for free at any time.
In general, bad or poor credit ranges from 300 to mid-600s. Fair to good ranges from the mid-600s to the mid-700s. Lastly, excellent credit begins in the mid-700s.
Only a fraction of the population has an excellent to perfect credit score.
The secured credit cards on this list cater to individuals with credit scores below 650.
How is credit calculated? Visit this post to learn more.
Best Secured Credit Cards for Bad Credit
We researched the best secured credit cards for bad credit currently on the market. Here are our top picks!
1. Discover It Secured
If you’re eager to enjoy some rewards on top of your secured credit card use, look no further than the Discover It Secured card.
There’s no annual fee for using this card. You can establish your credit limit by placing a $200 – $2,500 cash deposit. Don’t forget that you can claim this deposit once you leave your account in good standing!
With a Discover It Secured card, your account is reviewed every 8 months to assess your standing and eligibility for an upgrade to an unsecured card. This happens automatically.
The best part about this card? Its cash back rewards!
When using this card, you can get 2% cash back at gas stations and restaurants and 1% cash back on all other purchases. Discover will also match the cash back dollars you earn in your first year of use.
The Discover It Secured’s APR is 25.24%, which is lower than the APR on a no credit check loan. You do have to have a bank account in order to request a credit limit.
2. Capital One Secured Mastercard
For individuals with a credit score between 300 and 630, this card is for you. With the Capital One Secured Mastercard, users enjoy a $0 annual fee and a reasonable 26.99% variable APR.
This card makes our list because users don’t have to make a cash deposit equal to their credit limit. You can get a credit limit of $200, for example, with a deposit as low as $49.
Capital One also lets users pay their deposit in installments! You can increase your credit limit after you pay your bill on time for the first five months.
This card does have a few more requirements for eligibility, such as specific debt-to-income ratios.
3. DCU Visa Platinum Secured Card
There’s no annual fee for using the DCU Visa Platinum Secured card, but that’s not the only thing we like about this card.
With the DCU Visa, users enjoy a relatively low variable APR of 13.75%. You also don’t have to pay a fee for cash advances or balance transfers!
DCU Visa does not have a limit for the cash you can deposit for your credit limit, either. To enjoy these perks, you do have to be a member of the Digital Federal Credit Union.
Anyone with any credit score is eligible for this card, including individuals with high credit.
4. Citi Secured Mastercard
If you’re looking for a no-nonsense secured credit card, check out Citi’s secured Mastercard. This card does not have an annual fee, and its variable APR is a moderate 24.74%.
Users in need of balance transfers will appreciate Citi’s low 3% fee ($5 minimum) for such transfers.
Your cash deposit value equals your credit limit on a Citi secured Mastercard, but you can establish a limit as high as $2,500.
This card is also an excellent option for individuals brand new to credit!
Final Thoughts: The Best Secured Credit Cards
Secured credit cards give users an effective way to build credit quickly. The best secured credit cards for bad credit offer perks–such as cash back–on top of this.
If you use your secured card wisely, you may be eligible for an unsecured card in no time. Plus, you’ll get to claim your refundable deposit once you are!
Now you know what options for secured cards are out there. What comes next?
We recommend reading this post about requesting credit cards when you have bad credit!