By Adam Jusko, ProudMoney.com, adam@proudmoney.com
If you have a bad credit history or very little (or no) credit history, banks may approve you for a secured credit card that requires a refundable security deposit but otherwise works just like any other credit card (meaning you pay your balance each month, payments are NOT taken from your deposit). Secured credit cards can help you build credit if you use them responsibly, and they are one of our favorite ways to do so.
Below we list the best secured cards on the market. We’re especially partial to cards that allow you to “graduate” — meaning either returning your security deposit after a certain period of on-time payments and letting you use the card unsecured, or offering you an upgraded, unsecured card while also returning your deposit. We also tend to favor major banks, because when you’re building credit it is to your advantage to build a relationship with a bank that offers unsecured credit cards you might want in the future.
- Discover It Secured Card – Deposit anywhere from $200 to $2500 and get a credit line of equal size. Offers a modest cash back reward program: a 1% rebate on most purchases, and 2% on restaurant and gas purchases (on up to $1000 in such purchases per calendar quarter). A good payment history can help in building credit, and “After 7 months, we begin automatic monthly account reviews to see if you qualify to convert to a standard, ‘unsecured’ card and get your deposit back.” No annual fee.
- BankAmericard Secured Card – Put down a security deposit of anywhere from $200 to $5000 and get a credit line of that same amount. Also, they will “periodically review your account and, based on your overall credit history (including your account and overall relationship with us, and other credit cards and loans), you may qualify to have your security deposit returned.” No annual fee.
- Capital One Secured MasterCard – Get a credit line of $200 to start, after you deposit $200 (in some cases you may be able to deposit a little less). If you make your first 5 payments on time, Capital One might increase your credit line without a further deposit. “With responsible card use, you could earn back your deposit and upgrade to a standard, unsecured Platinum card.” No annual fee.
- OpenSky Secured Visa – While this secured credit card is not from a major bank and has no path to “graduate” to an unsecured card, some people choose it because of the fact that it does not do a credit check when you apply. (It does report to the major credit bureaus once you have it, though.) It has a $35 annual fee that is outside of the security deposit you put down to get the card, but a reasonable (for a secured card) 21.64% interest rate.
- Citi Secured Mastercard – You put down a deposit anywhere from $200 to $2500 and your credit limit equals the amount you deposited. No annual fee. Citi does not mention the possibility of an upgrade to an unsecured card.
- U.S. Bank Secured Visa – Your security deposit is put into a U.S. Bank savings account with this secured card, so you do earn a very little bit of interest. No annual fee. It is unclear how often U.S. Bank might consider this card for “graduation” to unsecured.