How to Choose the Best Secured Credit Card For You

A secured credit card is a type of credit card for people with bad credit and no credit history.  Approval for this account is not based on the applicant’s credit history or score.  Rather, obtaining a secured credit card depends on your capability to submit the required security deposit.

Some issuers of secured credit cards require a minimum of $200 security.  However, if you prefer to have a higher credit line, you should be prepared to provide a higher cash deposit as well. The cash deposit serves as a guarantee if you are unable to pay your monthly payment, they will use the security deposit to cover what you owe.  Therefore, your credit limit is tied to your security deposit. 

Why are secured credit cards so popular in building and rebuilding credit?

A smart secured credit cardholder can use this account asCredit_Card_Offers a stepping stone towards better credit.

  • Secured credit cards generally don’t require a credit check.
  • These cards are issued by banks, credit unions and online.  So its easy to find one that fits your needs.
  • These cards are available to people who have recently gone thru a bankruptcy.  When I lived in San Diego, the collection agency I worked with had partnered with a local lawyer to refer clients over to them when they said they were considering filing for bankruptcy.  This lawyer that not only helped his clients file their bankruptcy, but he had partnered with several financial institutions to provide his clients with secured credit cards in order to help them start rebuilding their credit.

The strategy for building strong credit using this account is quite simple.

  • Use the card regularly – show lenders how responsible you are by making your monthly payments on time.
  • If your card allows it, add money to your security deposit as often as you can.   Not only will this increase your credit limit, but it means when your card becomes unsecured, you will get all that money back!  A great way to use this card as a savings account to!  This will get you in the habit of creating a savings account.
  • Check your credit report regularly.  Make sure the card is being reported correctly and if you have added money to your security deposit, make sure your credit report reflects your current credit limit.

How to choose the right card for you

When choosing a secured credit card, there are some points to remember.  Consider the following tips:

  • Choose a card from a reputable issuer.  There are many offers for secured credit cards in the market but it’s important to make sure that the card is issued by a legitimate company.
  • Check the fees.  Because so many different types of companies offer secured credit cards, you need to do your research and see what kind of fees they charge.  I’ve seen some with almost no fees, to some with large fees that rival the unsecured bad credit cards (which generally carry $100s of dollars in fees) !    Aside from the annual fee, you should also check out other fees such as late fee, over-the-limit fee, etc.
  • Make sure your payments are reported.  You should choose a secured credit card that reports to the three major credit bureaus.  This way, you will be able to use the card for building good credit.  As you pay bills with your secured credit card and pay off your balances promptly, you can boost your credit score one step at a time.  Some cards offer this service for free, but over the years I’ve started seeing banks charge for this service and calling it their “credit builder program”
  • Upgrade to an unsecured card.  Some issuers  will automatically upgrade the cardholder’s account to an unsecured account after 12 months of timely payments.  If after a year the bank doesn’t automatically offer to make this card unsecured, you should call them.  Just keep in mind this is extended to consumers who have been responsible with their credit card over the past year.  If you had late payments or went over your credit limit, don’t bother asking.  You will need to have a clean record for about a year to get this offered to you.
  • Understand how the deposit is used. Some secured credit card issuers put the cash deposit in an interest-earning account so that the cardholder earns interest while using their credit card.  Once it becomes unsecured some will send a check back, some will just leave it in a savings account until you ask for it back.  So be aware of how that deposit will be handled once your account becomes unsecured.

When choosing your secured credit, keep the above information in mind.  Choose the one that best meets your needs.  Remember if you can’t find a local financial institution to issue you a card, then look online.  Here we have listed secured credit card offers from online financial institutions.

About the Author:

Tara Tiemann is the credit specialist for  Which is a resource site for people who want to live debt free! If you are on a budget, using a Bad Credit Unsecured Cards and prepaid debit cards can save you big money!

About Liz Roberts

Liz Roberts is the new credit specialist for Go-Prepaid. If you are on a budget, we can get you discounted cell phone service from Sprint, Verizon and T-Mobile! NO CREDIT CHECK ! Using a prepaid services can save you a TON of money! Follow our blog to find out how!

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