How To Build Credit With Secured Credit Cards

The fundamentals of a secured card lies within a requirement for cardholders to set a security deposit that acts as collateral and 100% of the time, that deposit will become your line of credit. The main purpose of secured cards is to offer a way to build bad or lackluster credit scores and credit history through responsible usage. This is a good option for those of you that have a tough time getting approved for any other card outside of secured cards.

Editor’s Note: Keep in mind that a lot of card issuers will try to take advantage of you if you have very few options to choose from in the first place considering that you have little to no credit history; they could give you a card notorious for having a high APR or annual fee.

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Secured Card Components:

This section will include all the counterparts/components that goes into a secured card:

• Reported to which Credit bureaus:  Three major credit bureaus: Equifax, TransUnion & Experian. Most, if not all secured cards report to all three bureaus; responsible usage of the card is a must if you want to see improvement.
• Minimum security deposit: Lower is better. A lot of times, credit issuers offers higher credit limits to lure you into maxing out your card into a debt threshold and be left with an insane amount of interest and fees attached.

Secured Card Tips:

• Avoid carrying a balance. APR is fairly high on these cards. If you cannot afford to pay off your whole balance, try making the minimum payment.
• Don’t miss any payments. Prove that you can manage your payments consistently if you want to build your credit score. Even though I do stress that paying off your balance in full is the most optimal option, making consistent payments is still on the table for anyone trying to build their credit score. Also, missing a payment would mean that you’ll have to also pay a late fee on top of the payment you already owe (not including the higher penalty interest rate).
• Use your card every month. Using your card consistently, even once, per month will show your responsible with credit usage and will be reported to all three credit bureaus and build on your credit report. In other words, if you applied for a secured card in hopes of building your credit score, don’t just let the card sit; it won’t do anything towards your credit score.

BankCheckingSavings’s Best secured credit cards:

1.)  Discover it® Secured Card:

• Best Feature: Rebuilds credit & has an exceptional rewards program.
• Annual Fee: $0
• Minimum Security Deposit: $200
• Expiration Date: None
• Additional Benefits:  Rewards Program, FICO® Score with Discover Credit Scorecard, monthly account reviews starting at 8 months

Discover it® Secured Pros:

• The card reports to all three credit bureaus.
• $0 Annual Fee
• Rewards never expire, and there’s no minimum redemption amount.
• There’s no penalty APR for paying late, and no late fee the first time you miss the due date.
• Access to FICO Score
• After 12 months, cardholders will automatically be evaluated monthly to see if they can qualify for a unsecured credit card; in which you will be converted to the new account and the rewards will carry over.

Discover it® Secured Cons:

• Interest Rate is rather high: 10.99% on balance transfers for 6 months, and then the ongoing APR of 23.24% Variable.
• Annual income must be over $10,000 to apply for this card
• Must have a Discover Checking and Savings account to make the initial deposit.

2.)  Capital One® Secured MasterCard:

• Best Feature: Rebuilds credit
• Annual Fee: none, but initial security deposit is required
• Minimum Security Deposit: $49, $99 or $200, determined based on your creditworthiness
• Expiration Date: none
• Additional Benefits: High potential for a higher credit line; VantageScore® using CreditWise®.

Capital One® Secured MasterCard® Pros:

• This card reports to the three major consumer credit bureaus
• it’s possible to get a credit limit on this card that’s higher than the security deposit you put down.
• You can make partial payments on your deposit, on the guidelines that you provide the full amount within 80 days of being approved. Keep in mind that your account will not be activated until your deposit is paid in full.

Capital One® Secured MasterCard® Cons:

• Strict Approval Process: You won’t qualify without a checking or savings account from them or if you have file bankruptcy that’s still on your credit report, etc.

3.)  Citi Secured Mastercard:

• Best Feature: Rebuilds Credit
• Annual Fee: $0
• Minimum Security Deposit: $200
• Expiration Date: none

Citi Secured Pros:

• Reports to all three bureaus.
• No annual fee

Citi Secured Cons:

• No rewards structure

Conclusion:

If you’re currently in the market for building your tarnished or relatively low credit scores/credit history, then a Secured Card could be a viable option, however, I feel that it’s necessary to point out that this should be your last option if you can not get approved for any other credit cards outside of secured cards. You will need to meet the security deposit minimum requirement in order to get a credit line and we absolutely advise responsible usage meaning making payments in a timely manner, making at least one charge per month and avoid putting too much credit utilization on the table. This would definitely contribute towards getting your credit score in ship-shape! Find out which card is fit for you by checking out our complete list of Credit Card Promotions today!