Best Secured Credit Cards

Building credit takes time. Start with a secured credit card. Secured credit cards are a tool that can help you establish or build your credit history. Make your payments on time each month, and keep your balance low relative to the credit limit, for positive marks on your credit report. If used responsibly, secured credit cards can help you raise your credit score and improve your financial standing. Secured cards are most beneficial for:People with poor FICO scores (579 and below)People with no credit history who want to establish good creditBecause secured credit cards are a tool for people who already have credit problems or need to build a credit history, it’s important to understand exactly how secured credit cards work and which are the best ones available to you.

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Best Secured Credit Cards (6)

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What is a secured credit card?

A secured credit card is backed by a cash deposit you make when you open the account. The deposit is usually equal to your credit limit, so if you deposit $200, you’ll have a $200 limit.

What happens to that $200 deposit if you always pay your bill on time? You’ll eventually get it back. Use the card responsibly, and you can improve your credit enough to qualify for an unsecured card — one that doesn’t require a deposit.

Some of the best secured cards may allow you to upgrade your account directly to an unsecured card. Others don’t have an upgrade process, so you’ll have to apply elsewhere, then close the secured card. When you upgrade or close a non-delinquent secured card, the issuer refunds your deposit.

How do secured credit cards work?

Once the initial deposit is paid, secured cards work just like unsecured ones:

You can use them wherever credit cards are accepted, including online

You can build or rebuild your credit by using the card responsibly and paying your balance on time

You incur interest if you carry a balance

Most major credit card issuers offer both secured and unsecured cards. Annual fees are common, but you shouldn’t pay more than $50. You can find secured cards with a $0 annual fee among our favorites.

If you can’t qualify for an unsecured card, a secured card can be a great tool as you look to improve your credit. But it’s as important to be responsible with a secured card as it is with any other loan or bill that shows up on your credit report.

Is a secured credit card right for you?

Consider a secured credit card if you:

Have poor, limited, or no credit and want to improve

Can put down a security deposit, usually at least $200

Will use it responsibly to build or rebuild your credit

Understand how to pay off your card correctly every billing period

Checked out other unsecured credit card options first

Selection criteria: what makes a great secured credit card?

Secured cards are designed for poor or limited credit, so they sometimes have high fees and unfavorable terms. If you don’t have good credit, your options will be limited. But some secured cards are definitely better than others, and there are several factors to look out for to find the best card for you.

1. No annual fee, or a reasonable fee: The best secured cards either have no annual fee or the fee is quite manageable, around $30 to $50.

2. No extra fees: Some secured cards have additional costs like application fees, card issuance fees, monthly maintenance fees, and others. Avoid cards with fees like these!

3. Reports to all three of the major consumer credit agencies: The major credit card issuers will report to all three major credit bureaus, but this isn’t always the case for smaller credit unions. When building a credit history it’s better to have your monthly payment activity recorded on more credit reports. Prepaid and debit cards won’t report your activity to the bureaus.

4. An appropriate security deposit and credit limit: Secured cards have different maximum credit limits. Depending on your spending habits and financial needs, you may want a card with a very large maximum limit. Or you might be satisfied with a smaller limit.

5. A program to refund the security deposit: Some card issuers will refund the security deposit and allow you to continue using the card, if you prove yourself to be a responsible credit user.

6. A program to upgrade to a different card account: In some cases, depending on your creditworthiness, card issuers will offer an upgrade to a completely different, unsecured credit card.

7. Rewards, in some cases: It’s rare to find a secured card with a rewards program, allowing you to earn points or cash back. But there are a few out there.

8. Additional benefits: Most secured cards come with a very basic set of extra benefits, like Purchase Protection. Occasionally you’ll find a secured card with more valuable benefits, like getting a higher credit line with Capital One.

How to make the most of your secured credit card?

As you know by now, secured cards are best for credit building. Building rewards and convenience come later. As long as your primary card is a secured card, though, you'll want to follow a few basic financial rules:

1. Pay on time. While it takes months to build your credit with good payment habits, one or two late payments can cause a big drop in your score. And not only is paying on time good for your credit, it keeps you from having to pay late fees and higher interest charges, and even losing your card.

2. Pay in full. In fact, pay multiple times a month to keep your utilization ratio low – because you don't know when your issuer will send your account information to the 3 major credit bureaus.

3. Use for credit building. Don't use the card to carry a balance. In general, carrying a balance is not advisable with any credit card, but with a secured card, the stakes are even higher. That's because your available credit is so low.

4. Place a small charge on the card. Don't forget to use the card each month. If you lose your card to inactivity, you can't build credit month by month. Put a recurring reminder on your calendar to ensure that you don't forget.

5. Make a budget. Once your available credit has increased, and you can use your card for convenience, create a budget that outlines your monthly expenditures for both your checking account and your card. Review the budget each month to make sure you are staying on track and are able to pay in full each month.

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