What is a Good Secured Credit Card?

What is good secured credit card

A secured credit card is usually the only option to rebuild credit for people with recent bankruptcy or other problems in a credit history.

From the outside, these cards work like a regular credit card: you swipe it or pay online and the merchant gets the money for purchases. All your purchases accumulate on a card balance, which you can repay in full at the end of the month or within the grace period of 20-25 days.

The main difference with the secured card is the security deposit you need to put down as collateral against your credit line. There are two types of secured cards: a credit limit exactly matching a security deposit (i.e. $500 credit limit with a $500 security deposit) and the ones that let you have a credit line bigger than your security deposit (so-called hybrid cards).  

Some cards issuers review your case from time to time and can offer you an unsecured card eventually. Others let you apply for an unsecured card after a period of good use of the secured card.

The main goal of the secured card is to let you rebuild your credit to be able to get a regular card when your FICO score is good enough.

Therefore, with a secured card you should:  

  • Always pay off your balance in full at the end of the month.
  • Do not use more than 30% of your credit limit – 10% is even better. That is called “credit utilization” and it is an important factor in a FICO score model. If it is needed, pay your balance two or more times a month to keep this ratio as low as 10%.

 

Here are my favorite secured cards for 2016:

read card review Apply Now
at issuer’s secured site
bad credit
no credit
intro purchase APR no intro offerregular APR11.75% (V)
intro BT APR n/a no BT fee

no annual fee

read review
read card review Apply Now
at issuer’s secured site
bad credit
no credit
intro purchase APR no intro offerregular APR9.90 - 19.90% (V)
intro BT APR no intro offer 3% BT fee

$35 annual fee

reports to 3 bureaus

no penalty APR

read review
read card review Apply Now
at issuer’s secured site
bad credit
intro purchase APR no intro offerregular APR23.24% (V)
intro BT APR 23.24% 3% BT fee $5 min
rewards 1x-2x miles per dollar +5,000 bonus
  • 2x miles on gas and groceries
  • 1x miles on all other purchases
  • get 5,000 bonus on first card use

 

$25 annual fee

$0 first-year fee

reports to credit agencies

24 days grace period

unsecured card offer after 12 months

read review

What to look for when shopping for a secured card:

  1. Consider only the cards that report to major credit bureaus as unsecured. We try to have this information when possible in card reviews on our site.
  2. Get the card with a grace period. Some secured cards don’t have any grace period and it is just not convenient and can even be dangerous if you miss your payment.
  3. Find the card with the smallest annual fee. Fees vary a lot, and there is nothing good in owning an expensive secured card – no benefits can offset an annual fee.
  4. Find a low APR card, but we would not recommend you carry any balance on a secured card. The only goal of the secured card is to let you rebuild your credit and eventually be approved for an unsecured credit card.

It is good to have a card with a FDIC secured and interest earning security deposit to earn something while your money is sitting in the bank account.



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