Best Secured Credit Cards of April 2020

Elizabeth is a writer specializing in credit cards, debt repayment, and small business. Her work has also appeared on MSN Money, Yahoo! Finance, and Business Insider.

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Secured credit cards can be an excellent way to gain access to credit and rebuild your credit score, especially if your credit history is less-than-perfect. However, it's important to choose wisely, as the wrong secured credit card can cost you lots of money in fees and interest. We've done the research for you and narrowed down the list of picks to a handful of cards that meet a vast array credit building or rebuilding needs. Most importantly, each pick offers a wealth of perks without charging unreasonable fees.

Ratings Methodology
Cash back
Discover it® Secured

Apply Now

Apply Now

On Discover's Secure Website.

Apply Now

On Discover's Secure Website.

Rewards

2% cash back at Gas Stations and Restaurants on up to $1,000 in purchases each quarter, 1% cash back on all else

Annual Fee

$0

Intro APR

Purchases: N/A
Balance Transfers: 10.99%, 6 months

Ongoing APR

22.99% Variable

Bonuses & Perks

Double cash back in the first year, FICO score for free

Highlights
  • No Annual Fee, earn cash back, and build your credit with responsible use.
  • It's a real credit card. You can build a credit history with the three major credit bureaus. Generally, debit and prepaid cards can't help you build a credit history.
  • Establish your credit line with your tax return by providing a refundable security deposit of at least $200 after being approved. Bank information must be provided when submitting your deposit.
  • Automatic reviews starting at 8 months to see if we can transition you to an unsecured line of credit and return your deposit.
  • Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases – automatically.
  • Get 100% U.S. based customer service & get your free Credit Scorecard with your FICO® Credit Score
  • INTRO OFFER: We automatically match all the cash back you've earned at the end of your first year.
  • Get an alert if we find your Social Security number on any of thousands of Dark Web sites.* Activate for free.
Annual Fee

$49

Intro APR

Purchases: N/A
Balance Transfers: N/A

Ongoing APR

9.99%

Bonuses & Perks

Credit lines from $200-$5,000

Highlights
  • Credit lines available from $200-$5000
  • Your credit limit matches your deposit
  • No minimum credit score required
  • Low fixed 9.99% APR rate on purchases
  • No processing or application fees

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Whether you have bad credit, no credit, or have filed for bankruptcy, secured credit cards are a good way to start building banking relationships. Using a secured credit card and making regular payments will boost your credit score so that you can qualify for other types of loans and better credit cards in the future.

There are numerous secured credit cards out there, but many come with high fees and other charges that make them a poor way to build or rebuild credit. We'll explore the best secured credit cards on the market, and show you how to manage your secured credit card to maximize the benefit your credit score.

What is a secured credit card?

A secured credit card is just like any other credit card with one big exception: You have to put down a deposit as collateral to open a secured credit card account. The collateral protects the issuer from losses, which allows them to approve secured cards even when the applicant has bad credit or no credit at all.

Typically, the best secured credit cards carry a low credit limit of $200 to $250, and are generally considered to be “starter” credit cards. They are also useful for people who have bad credit, since they can help you add a good account to your credit report if managed appropriately.

Who can be approved for a secured credit card?

Because applicants have to put up cash as collateral for a secured credit card, most issuers will approve just about anyone, no matter how bad their credit. Whereas it is significantly harder to qualify for a top-tier unsecured card than a lower-tier unsecured card, the odds of getting approved for the best secured credit cards are not much different than the odds of getting approved for the worst secured card.

What to look for in a secured credit card

Secured credit cards are some of the simplest of credit cards, but there are a few things that make some cards standout stars in the category. Here are some features that differentiate the best secured credit cards from the very worst, in relative order of importance.

No annual fee: Secured cards typically have low credit limits, and those who use them do so sparingly. Thus, many banks make money on the annual fees they charge to have an account. The best secured cards allow you to open an account with no annual fee.

Low or partial security deposit: Applicants should naturally prefer putting up less collateral. The best secured cards allow you to get started with $200 or less, making them available to people who are on a tight budget.

Reporting to all three credit bureaus: One of the major advantages of having a secured credit card is that it can help you build or rebuild your credit history. Secured credit cards should report your behavior to all three major credit bureaus so that when you manage your account wisely, you're rewarded with an uptick in your credit score.

Credit graduation: You won't be stuck with a secured credit card forever. The best secured cards convert into unsecured cards after several months of on-time payment history. When your credit card “graduates,” the card company will return your deposit, thus turning your secured card into an ordinary unsecured card.

Rewards: Secured cards increasingly offer rewards on every swipe, enabling you to earn cash back on every purchase you make with the card. Rewards aren't a make-or-break feature, though, since they aren't a primary reason for opening a secured credit card account.

Do secured credit cards help your credit?

If you follow a few best practices, you can use a secured credit card in a way that will maximize the positive benefit to your credit report and credit score. Read our beginner's guide to credit cards to make sure that you fully understand how to use them responsibly. Here are five steps to making sure your secured credit card helps your credit.

  1. Use the card sparingly. For best results, cardholders should try to keep their balances under 30% of their credit limit at all times. That means your balance should always be lower than $60 if you have a secured card with a $200 credit limit. If you have to make multiple payments in one month to avoid using more than 30% of your balance, then do it! Your credit utilization ratio, or your balance as a percentage of your credit limit, makes up 30% of your FICO® Score. Lower utilization is better.
  2. Pay on time, and in full. It is a myth that paying interest on a balance is necessary to get good credit. Always pay your secured credit card on time, and in full, by paying the "statement balance" when the bill arrives. If you pay this amount on time and in full, you won't pay a dime in fees or interest charges, and get all the benefit of having a card that reports your on-time payments to the credit bureaus, which can increase your credit score.
  3. Don't apply for more cards. One secured credit card managed correctly can do a lot to help you build or rebuild credit. And while it may be tempting to open another credit card account, having two cards won't double your progress. If anything, having more accounts just increases the risk that you miss a payment, get into credit card debt, or make other mistakes that might set you back. Apply for the best secured card and stick to having only one for a year or so before thinking about other offers.
  4. Watch your progress. The best secured credit cards offer free access to your FICO® Score, so watch as your score changes over time. You should begin to see improvement as the card ages and your on-time payments pile up. Seeing your progress can be very motivating, which is why we prefer cards that offer free access to your FICO® Score.
  5. Keep the card open -- if it doesn't charge an annual fee. Even if you later decide to move on to other credit cards, it can be smart to keep any credit card account that doesn't charge an annual fee open and active by using it for a small purchase every few months. Issuers frequently close inactive accounts, at which point they'll stop reporting to the credit bureaus. Additionally, maintaining a high overall credit limit and keeping old accounts open are both actions that keep your credit score healthy. That being said, if your credit card charges an annual fee, it's not worth keeping around solely to boost your credit.

How to get a secured credit card

You can apply for a secured credit card online, and you'll often receive a decision immediately. The application process is typically brief, but you will need to have the following information handy.

  1. Personal information: Your Social Security number, your full name, and your date of birth.
  2. Contact information: Your address, email, and phone number.
  3. Financial information: Your employment status, annual income, and mortgage or rent payments.

Once you open your secured credit card, you'll want to make the required security deposit as soon as possible. You can usually do this in person, by mail, or online. Most secured credit cards give you the option to add bank account information at the time of application so that you can automatically transfer the funds to your new card.

Other options to consider

Secured credit cards are ideal for people who want to build or rebuild their credit and can't qualify for an unsecured credit card. However, even the best secured card will have its drawbacks. They typically come with very low credit limits, and you'll need to pay a security deposit, which might be difficult for some. Here are some other options worth considering.

Unsecured credit cards: If you have good credit, you'll want to apply for a regular, unsecured credit card. These credit cards typically come with higher limits, lower interest rates, and better rewards.

Student credit cards: If you're a student with no credit history, the best credit cards for students have no annual fee, don't require you to have a robust credit history, and some even offer rewards.

Credit cards for bad credit: In addition to secured credit cards, there are now a number of credit cards that aren't secured and don't require good credit. The best credit cards for bad credit have no or a low annual fee and help you rebuild your credit score.

FAQs

  • A secured credit card is a credit card designed for people with bad or no credit that requires a security deposit, which acts as collateral. In the event that the cardholder is unable to make on-time payments, the security deposit then serves as a back-up. Secured credit cards aren't for everyone, but they're a good idea if you're having trouble qualifying for any other credit cards, either because you haven't had a chance to establish your credit history yet or if you need to rebuild your credit from past financial mistakes. Secured credit cards are much easier to qualify for and give you the opportunity to get a card and start raising your credit.

  • These cards are intended for those who are new to credit or rebuilding their credit, and as such, most people shouldn't have trouble getting approved. You don't need to have good credit -- or any credit at all -- in order to apply. The security deposit serves as collateral to mitigate the risk of accepting consumers with less-than-perfect credit. That being said, card issuers won't accept everyone. If your secured credit card application was denied, you should receive a letter telling you why within seven to 10 business days. Depending on the reason you were denied, you can try to correct the issue before applying for another card.

  • You can improve your credit rapidly by using a secured credit card regularly and paying your bills on time. In fact, building up a history of on-time payments is one of the best ways to help your credit. However, there's no specific type of credit card that builds credit faster than others. How fast your credit improves will depend entirely on your financial habits and the information on your credit report.

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