If you have had credit problems in the past, it can be difficult once you get ready to rebuild your credit score. In order to increase your credit rating, you need credit. However, because of your current credit score, you may not qualify for many of the credit cards that are offered. For most people with no credit or poor credit, the only option is a secured credit card.
A secured credit card is usually a normal looking card that just requires a security deposit of at least $200. When you make your deposit, the credit card issuer will typically issue a credit card with a credit limit in the amount of your deposit, which you can use just as you would any other credit card.
The downside of secured cards is that many are notorious for charging extra fees, higher annual fees, and the highest APRs available. Many of the extra fees are deducted from your credit limit. It is important when considering a secured card, that you are aware of any extra fees involved.
Secured credit cards are often confused with debit cards and prepaid cards. However, the difference is that with secured cards, many card issuers report your activity to the three major credit bureaus. After managing your account responsibly over time, you can establish a positive credit history. Prepaid cards and debit cards do not report your payments to the credit bureaus and are not useful in rebuilding or building credit.
Some of the best secured credit cards to choose from include the following:
This card has no credit check so you can qualify even if you have filed bankruptcy. You must make a security deposit of at least $200 and there is a $35 annual fee. The variable APR is 17.64% for purchases, balance transfers, and cash advances.
Primor offers two different types of cards, the Gold and the Classic, neither of which requires a credit check. Both include an annual fee of $49 or $39, depending on the card you choose. The Gold card has a fixed APR of 9.99%, and the Classic version has a fixed APR of 13.99%, which are both fairly low APRs for secured credit cards.
If you carry a balance from month to month and aren’t able to pay in full every month, it’s important that you select a secured card with a low interest rate, so you don’t end up paying high amounts of interest. The best low APR secured credit cards include the following.
Although you need to be a member of Navy Federal Credit Union to qualify for this card, it offers one of the lowest APRs available at 9.24% - 18%. There is also no annual fee, balance transfer fee, or cash advance fee. Further, there is no foreign transaction fee on the card. With the nRewards program, you can also earn a point for each dollar you spend with the card.
This card requires USAA membership but offers an APR of 10.15% - 20.15% for purchases and balance transfers. The annual fee is $35, but your security deposit with this card is held in an interest bearing account, which can result in a little more than what you start with when your deposit is refunded. Because this card is primarily for military personnel and family members, it also includes military benefits you won’t find with other cards.
It’s rare for a secured card to offer rewards of any kind as the focus is primarily on rebuilding or building your credit. However, there are cards such as the following that do offer rewards.
$45 annual fee
$0 first-year fee
reports to credit agencies
24 days grace period
unsecured card offer after 12 months
This card from U.S. Bank offers two miles for each dollar you spend on gas and grocery store purchases and one mile for each dollar on other purchases. You can use these miles for AeroMexico flights and flights with SkyTeam airlines such as Delta and Korea Air. Unlike other secured cards, this card also includes travel perks like free checked bag and a companion certificate each year. The annual fee is $25, which is waived your first year. The APR is 23.24%.
Annual fees and extra fees are often a part of secured cards you can’t get away from. However, there are secured cards without annual fees such as the following.
This card is secured and requires a deposit of $49, $99, or $200, based on your credit worthiness. In exchange, you get a card with a credit limit of at least $200. After you make the first five monthly payments on time, you could qualify for a higher credit limit without adding to your deposit. The variable APR is 24.99%. There is no annual fee or balance transfer fee.
The Credit Card Act of 2009 helped to regulate the enormous fees that consumers were paying for secured credit cards. This act prohibited fees within the first year that exceed 25% of your balance. This means that if you deposit $200 to your card, you should not have fees totaling more than $50. For many consumers, it is best to pay a one-time activation fee of $20 rather than a monthly fee of $5. Make sure you calculate the costs you will incur with the secured card you choose.
Further, you should be aware that secured cards are not guaranteed. There are card issuers which require a specific credit history, such as Discover. If you are having difficulty qualifying for a secured card, you should consider those that offer guaranteed approval or no credit checks until you are able to increase your credit rating.
Also, when it comes to the high APRs, you will find with secured cards, check for your grace period. Some secured cards offer a grace period for paying your entire balance without incurring interest. If you make it a habit of paying your balance in full every month rather than carrying your balance from month to month, you can save yourself quite a bit of money.
You can find more information about secured credit cards here.