If you’re in the market for a secured credit card then you probably have below average credit and are looking to increase your credit score. Unfortunately, most people with poor credit have to resort to high interest rates on loans or even the dreaded payday loan just to make ends meet. But one way to get out of the credit hole and build up a three digit credit score closer to 700 is with a secured credit card.
The difference between a secured and unsecured credit card lies in the name. An unsecured credit card provides a consumer credit without having to put anything up as collateral. If the consumer defaults, the credit card issuer has nothing to collect initially, and must go through the collection process to obtain the funds. A secured credit card on the other hand requires a deposit up front, which is held in case payments are not made on time. The amount of the deposit is equal to the consumers credit line and from that point on, the card acts like a normal credit card.
The main drawbacks to secured credit cards are their lack of rewards and high fees, but we’ve done our best to bring you the best secured credit cards available today, which include low fees. Secured credit cards are a great way to rebuild credit, as all of the cards listed below report to the three major credit bureaus. If you own a secured credit card that deserves to be added to our list, let us know!
PT’s Pick for the Best Secured Credit Card
USAA Secured Credit Card – USAA continues to have an outstanding reputation among the military community, and they are now bringing secured credit cards to the table. If you or a member of your family is or was in the military (USAA will ask you a couple of questions before completing your application to check your eligibility), this secured credit card is the best option around. When applying, you will also open a 2 year CD which earns interest on your initial secured deposit, which can range from $250 to $5,000 depending on your credit line. The variable interest rate is a very low 9.90% and the annual fee is a modest $35. The USAA Secured Credit Card reports to all three major credit bureaus, helping you re-establish your credit history.
Capital One Secured MasterCard – One of the few major credit card issuers that provides a secured credit card, the Capital One Secured MasterCard offers a credit line of up to $3,000. Once you’ve established a history with Cap One, you may receive a higher line of credit, or even the opportunity to apply for an unsecured credit card. The variable APR is high at 22.9%, so make sure you pay your balance in full each and every month but the annual fee is a very low $29 (the smallest on this list). The Capital One Secured MasterCard reports regularly to all three major credit bureaus.
Open Sky Secured Visa Credit Card – A touch better than the card above it (in terms of pricing details), the Open Sky Secured Visa Credit Card includes a variable APR of 17.50% and an annual fee of $29. Issued by Capital Bank, the Open Sky Secured Visa Credit Card offers up to a $5,000 initial deposit and four different ways to fund your deposit (checking account not required). This card also reports to all three major credit bureaus on a regular basis, and while the pricing is a bit better, I prefer the opportunity to convert your secured card to an unsecured card (as Capital One above allows). However if you feel a secured credit card is only a short term option, the Open Sky Secured Visa Credit Card does offer a better overall secured package.
USAA Secured Platinum American Express Card – Identical details to the USAA Secured Credit Card above, the USAA Secured Platinum American Express Card includes a very low 9.90% APR and a $35 annual fee. The deposit and credit limit range is $250 – $5,000 and the only difference between this and the USAA card above is the processor. American Express is designed more for customers looking for top notch customer service and concierge service, whereas MasterCard is universally accepted. I’ve had my share of stores decline taking my American Express (in Connecticut) so by selecting this secured card, you do run the risk of it not being accepted everywhere you shop.
The Secured Visa from Merrick Bank – Accepted everywhere you see the Visa logo, the Secured Visa from Merrick Bank offers customers a 17.45% variable interest rate w/ a $36 annual fee. There are no processing or application fees to speak of and the credit line a new customer can secure is up to $3,000. Whenever you are looking to increase your credit line, you can do so with no extra fees of any kind (which is rare on a secured credit card) and all three major credit bureaus are reported to when you use the Secured Visa from Merrick Bank.
First Progress Platinum Prestige MasterCard Secured Credit Card – Last but not least, the First Progress Platinum Prestige MasterCard Secured Credit Card dishes out a credit line of up to $2,000 ($300 is the minimum deposit) and has a variable interest rate of 11.99%. A higher than average annual fee of $44 is attached to the First Progress Platinum Prestige MasterCard Secured Credit Card and also included are all of the full features a normal MasterCard carries. Unfortunately, the reason this falls to the bottom of our list is that the residents of three states are ineligible to apply (New York, Wisconsin, Iowa).