So, you’re wondering how a secured credit card can improve your credit history. Secured credit cards, also referred to as prepaid credit cards, are an excellent strategy because your credit history benefits from the credit card issuer’s reporting of your purchase and payment activity to the major credit reporting agencies. The design of secured credit cards also provides you with protection from yourself with a credit limit that you secure with a cash deposit.
This sounds promising but you might be concerned that you will be relegated to unfavorable credit terms just because you credit history is less than ideal. But keep reading to discover how to rebuild your credit history under more fair and realistic terms than you might imagine.
What Should You Look for in a Secured or Prepaid Credit Card?
The features you might expect from a secured credit card are only slightly different from what you’d expect from an unsecured credit card. During adult life, many people run into financial difficulties that create a negative impact on their credit history. As a result, there is more competition among credit issuers to attract consumers looking to rebuild their credit. That competition means better credit terms for you.
In considering how you’ll use your secured credit card, keep the following points in mind:
- If you plan to carry a balance, search for a low APR. Just know that to offset the lower interest rate, the credit issuer will generally require a higher annual fee.
- Similar to the first point, if you can pay the bill off in full each month, a secured credit card with little to no annual fee might be useful since paying in full will allow you to avoid the abnormally high interest rates that cards with little to no annual fees generally charge.
- Avoid secured credit cards that requires an excessive cash deposit unless there are features that offset this requirement such as no annual fee, reward points, or a lower interest rate.
With these criteria in mind, the following secured credit cards are some of the best for improving your credit history:
|Secured Credit Card||Annual Fee||Minimum Deposit||APR||Other Details|
|Discover it (R) Secured||$0||$200 paid from bank account||22.29%||Automatic consideration for an unsecured credit card. Cash back reward program|
|First National Bank of Omaha Secured Visa (R) Card||$0||$300||20.24%||No monthly fee.|
|Merrick Bank Secured Visa Card||$36 initially; none thereafter||$200||17.45%||$3 monthly fee after the first year. Note that your deposit will be reduced by the annual fee.|
|Applied Bank (R) Secured Visa Gold Preferred Credit Card||$48||$200||9.99%||No credit check or minimum credit score required and no penalty rates for late payment.|
|Assent Platinum Mastercard Secured Credit Card||$49||$200||0% on purchases for 6 months; 12.99% thereafter||Not available in NY, IA, AR, or WI.|
Remember that the secured credit card is a vehicle to rebuild your credit – not a permanent tool in your financial tool chest. Use it wisely and eventually you will qualify for an unsecured credit card with lower rates and better benefits. With these tips you can begin to make better financial decisions that will result in the reward of a favorable credit report and a financial profile that will earn you better credit terms you can bank on.