Introduction: Finding The Best Secured Credit Card and Secured Credit Cards for Bad Credit
Almost everyone knows what a credit card is, often from unfortunate spending sprees that might have left you mired in some pretty serious debt.
Not everyone, however, knows what a secured card for bad credit is. Secured and unsecured credit cards share many similarities in how they are used, but there are some fundamental differences in the former type, such as how to apply for a secured credit card as well as how the card works.
Furthermore, while many banks and financial companies advertise the supposed best secured credit card to rebuild credit, not all top secured credit cards come with the same terms and conditions.
While some secured credit cards to rebuild credit may come with heavy fees and penalties, the best secured credit cards should allow you to improve your credit score without unnecessary fees.
Image source: Freeimages
In this brief article, AdvisoryHQ will answer the question, “What is a secured credit card?” as well as look at the differences between unsecured and secured credit cards. We will examine some of the benefits of a secured credit card for bad credit as well as analyze how the card works.
Then, we will turn our attention to the best secured credit cards on the market and review three examples. The article will end by explaining, step by step, how to apply for a secured credit card so that you can begin the process of rebuilding your credit and improving your financial future.
What Is a Secured Credit Card and What Is the Difference Between Unsecured and Secured Credit Cards?
In our plastic-crazy society, sometimes it is simply impossible to get by without some sort of credit or debit card. While most banks will offer a free debit card with any sort of checking account, debit cards still don’t cut it for a number of purchases. For example, if you need to rent a car or purchase a flight online, you’ll need to have some sort of credit card. Both secured and unsecured credit cards are universally accepted for those major purchases that you just can’t make anymore with cash or check.
For people who have experienced financial difficulties in the past and have had their credit score lowered below the 600 benchmark, it may prove difficult to get a regular credit card. The requisites for opening a checking account at most banks is also becoming increasingly difficult. However, the best secured credit card is available to anyone regardless of credit history or credit score.
According to bankrate.com, secured credit cards for bad credit “require a cash collateral deposit that becomes the credit line for that account. For example, if you put $500 in the account, you can charge up to $500.
You may be able to add to the deposit to extend your credit, or sometimes a bank will reward you for good payment and add to your credit line without requesting additional deposits.”
The main difference between unsecured and secured credit cards is that while the credit line on a regular credit card is given to you by the company supplying the card, you must put up the credit line on a secured credit card for bad credit that you purchase. While not all banks or credit unions offer secured credit cards for bad credit, there are a number of issuers of the top secured credit cards that we will review below.
When deciding on certain secured credit cards to rebuild credit, it definitely pays to shop around. Some secured credit cards for bad credit will charge you astronomical fees. The fees can include an application fee, an annual fee, and even individual transaction fees. If you only deposit a small amount of cash onto your secured credit card for bad credit, you may see most of your deposit lost to these unnecessary fees.
How Does a Secured Credit Card Work?
Both secured and unsecured credit cards can be used to make purchases at any business that accepts forms of electronic payments. Since the best secured credit cards to rebuild credit are offered by the major credit card companies, such as Visa, MasterCard, Discover, and American Express, your best secured credit card can be used anywhere that these cards are accepted.
Once you have used up your deposit on your best secured credit card, you will need to make another deposit. Having one of the best secured credit cards to rebuild credit should make it easy for you to deposit more money on to your card. In some cases, the bank may even extend your credit line over time.
In certain arrangements, the credit limit on your best secured credit card may even be a certain percentage above what you deposit on the card. For example, if you deposit $1,000, some of the best secured credit cards may very well offer you an additional 20% in free credit over that deposit amount, giving you a total of $1,200 in credit.
You most likely won’t be able to draw any sort of interest on the deposit you put into the card, but various top secured credit cards may offer you certain rewards for spending. Since many banks that issue secured credit cards for bad credit will want to keep you as a long-term client, you may be offered an unsecured credit card after a certain amount of time of responsibly using your secured credit card.
Unfortunately, many banks are turning away from secured credit cards to rebuild credit and are, instead, turning to issue unsecured credit cards with low credit lines and high interest rates. While responsible use of both secured and unsecured credit cards will help you rebuild your credit score, the best secured credit card allows you the protection of not overspending since your credit line is mainly determined by the money you have deposited.
All-in-One Change Management Tools
Top Rated Toolkit for Change Managers.
Get Your Change Management Tool Today...
Benefits of a Secured Credit Card for Bad Credit
For people with extremely bad credit who are simply unable to get any sort of unsecured credit card, a secured credit card may be the only way to can gain access to the ease of plastic payment. However, the main benefit offered by top secured credit cards is the ability to start rebuilding your credit.
Using one of the best secured credit cards to rebuild credit is an easy way to quickly start the process of improving your credit score. As long as you use your card to rebuild credit regularly and redeposit funds once your credit line runs out, you should be able to see a measurable improvement in your credit score in the short term.
Unfortunately, not all issuers of secured credit cards for bad credit report to the three major credit bureaus. If the issuer does not report on your card, then you won’t be able to benefit from an improved credit score. Furthermore, you should always ask if the issuer will report your card as “secured.” This could actually count against your credit score. When searching for the best secured credit card, make sure that the issuer will report your card simply as a credit card.
The Best Secured Credit Cards on the Market
If you feel that you are ready to apply for a secured credit card and believe that a secured credit card for bad credit is the best way to improve your credit score, you can start your research with these three top secured credit cards reviewed below.
Top Secured Credit Cards: Capital One® Secured MasterCard®
If you are strapped for cash but still want to use one of the best secured credit cards to rebuild credit, the Capital One® Secured MasterCard® may be the best secured credit card for you.
With this best secured credit card, you might be able to get a $200 credit even if you only deposit $49. This is one of the only top secured credit cards that can offer you a credit limit higher than the security deposit you make. Furthermore, there is no annual fee on this best secured credit card, and it also reports to the three major credit bureaus.
The only drawback to this secured credit card for bad credit is that you might not be able to apply if your credit score is too low or if you have a recent bankruptcy on your credit history.
Top Secured Credit Cards: Discover it® Secured Card
The Discover it® Secured Card is another of the top secured credit cards out there. Besides having no annual fee, this best secured credit card also offers a pretty decent rewards program, especially for a secured card. You can earn up to 2% cash back on every $1,000 you spend each quarter at restaurants and gas stations.
If you use this best secured credit card only for gas and food purchases, you may very well be able to get back some of that money while still building credit. Furthermore, with this best secured credit card to rebuild credit, you’ll be able to check your FICO credit score every month on the monthly statement that the issuer sends you so that you can monitor improvements.
Image source: Freeimages
The only downside to this top secured credit card is that the APR is on the high side, at 23.24%. If you are dedicated to making on-time payments or only using the money on your cash deposit, this card is one of the best options for you.
Top Secured Credit Cards: Open Sky® Secured Visa® Credit Card
Another of the top secured credit cards out there is the Open Sky® Secured Visa®. This top secured credit card allows you to deposit anywhere between $200 and $3,000. You can apply for this best secured credit card even if you have a damaged credit score since the issuer won’t run a credit check when you apply.
Though it does come with a $35 annual fee, this may be one of the best secured credit cards to rebuild credit since anyone can apply. After all, a $35 annual fee is a pretty cheap price to pay for an improved credit score.
How to Apply for a Secured Credit Card
To apply for a secured credit card, you will most likely need to fill out an application and make an initial deposit on your card. Some of the top secured credit cards may run a credit check while others won’t. This will depend on the type of secured credit card for bad credit that you apply for.
The best secured credit card offering quality rewards and the possibility to extend your credit line beyond your initial deposit will most likely run a credit check while more simple options will not.
How Secured Credit Cards to Rebuild Credit Can Help You Regain Financial Control of Your Life
Most people seek out the top secured credit cards as a temporary solution that offers access to a form of plastic payment while also helping to rebuild credit.
Furthermore, after responsibly using your best secured credit card for a certain period of time, you may be able to upgrade to a secured card with your issuer.
By taking the time to research the best options in the top secured credit cards out there, you can be on the path to improving your credit and retaking control of your financial future.
AdvisoryHQ (AHQ) Disclaimer:
Reasonable efforts have been made by AdvisoryHQ to present accurate information, however all info is presented without warranty. Review AdvisoryHQ’s Terms for details. Also review each firm’s site for the most updated data, rates and info.
Note: Firms and products, including the one(s) reviewed above, may be AdvisoryHQ's affiliates. Click to view AdvisoryHQ's advertiser disclosures.