If you have poor credit, you’re not alone. According to Experian, one of the three major credit reporting bureaus, 16% of Americans have a credit score of 579 or less, putting them in the “very poor” range. Worse, nearly 26 million people are credit invisible, according to the Consumer Financial Protection Bureau, meaning they have no established credit history.
If you’re looking to rebuild your credit or establish a credit history from scratch, a simple strategy is to sign up for a secured credit card. With a secured credit card — which is a great first credit card for beginners — you put down a security deposit that acts as your spending limit.
As you make payments, the credit card company reports your activity to the credit bureaus. With regular, on-time payments, you can improve your credit.
The secured credit card market has become fiercely competitive in recent years. Now, some companies are offering benefits like cashback rewards, travel benefits, and introductory APR (annual percentage rate) offers. When shopping around for a card, make sure you keep these perks in mind, but also take into account other factors, like fees and APR.
5 secured credit cards that can help you build credit
Secured credit cards differ from traditional cards in that they require you to put down a deposit. Your deposit acts as collateral, minimizing the credit card company’s risk if you don’t pay up. As your credit improves, you may be able to transition to a regular credit card that is unsecured and doesn’t need a security deposit.
As you look for a card, consider its security deposit requirements, credit limits, and any benefits it may offer. Here are five of the most-popular secured credit cards available:
1. Capital One Secured Mastercard
If you’re looking for a secured credit card with the potential to qualify for a higher credit line, check out the Capital One Secured Mastercard.
With no annual fee, you can get approved for the card with a security deposit of $49, $99, or $200, depending on your creditworthiness. The minimum credit limit you can receive is $200, and the maximum is $1,000.
Don’t get discouraged if you’re only approved for the minimum. If you make your first five monthly payments on time, you’ll get a credit line increase, giving you more spending power.
Capital One reports your payment activity to all three major credit bureaus — Experian, Equifax, and TransUnion — so make all of your payments on time to boost your credit.
The Capital One Secured Mastercard does not have a special introductory APR. New purchases and balance transfers have a 26.99% variable APR. That’s quite high, so pay your statement balance in full each month to avoid costly interest charges.
The card doesn’t offer any rewards, but it does have some useful benefits, including travel accident insurance, auto rental damage collision coverage (secondary coverage), and 24-hour travel assistance services.
2. OpenSky Secured Visa
If you want more control over your credit limit, the OpenSky Secured Visa Card may be a smart option. OpenSky doesn’t check your credit when you apply, making it a smart choice for those looking for a credit card after declaring bankruptcy. Instead, you choose your own credit limit — from $200 to $3,000 — and secure it by making a one-time deposit for the full amount of your credit limit.
However, this flexibility does come with a cost. The OpenSky Secured Visa Card has an APR of 19.64%, Variable. It also has an annual fee of $35. There are some other fees to keep in mind, too:
- Inactive account fee: If you don’t use your card for 12 months or more, you’ll be charged $10 per month.
- Dormant account fee: If you don’t use your card for 36 months or more, you’ll be charged $10 per month.
- Foreign transaction fees: If you travel outside of the country, you’ll be charged 3% of each transaction in U.S. dollars every time you use your card.
The OpenSky Secured Visa Card doesn’t offer any rewards or card benefits like travel insurance. But it does report your payment activity to the three major credit bureaus, helping you build your credit history.
3. Green Dot primor Secured Visa Gold Card
Green Dot’s primor Secured Visa Gold Card is a good option for those who want a higher credit limit. When you put down a security deposit, you can qualify for a credit limit as low as $200 or as high as $5,000. The deposit you choose is the credit limit you’ll receive.
At just 9.99%, the primor Secured Visa Gold Card has the lowest APR of the secured cards on this list. And the company reports to all of the nationwide credit bureaus. However, it does have a number of fees:
- Annual fee: The card has a $49 annual fee.
- Replacement card fee: If you lose your card and need a replacement, you’ll have to pay $29.
- Foreign transaction fee: The card charges 3% of each transaction in U.S. dollars on all purchases made outside the United States.
- Credit limit increase fee: You can increase your credit limit at any time. However, you’ll have to pay up to $49 to do so.
Unlike some of the other cards on this list, the primor Secured Visa Gold Card does not offer any rewards or special benefits.
4. Discover it Secured
The Discover it Secured Card is unique in that it offers cash back on your purchases, so it’s perfect for someone who is looking to earn rewards while rebuilding their credit. You’ll earn up to 2% cash back on purchases.
As an added bonus, Discover will match all the cash back you earn at the end of your first year as a cardmember. There’s no limit to how much the company will match, so the cashback benefit can be significant.
A minimum security deposit of $200 is required to open an account, and your credit limit is equal to your security deposit. The maximum credit limit you can have is $2,500.
The card has no annual fee, but it does have a high 25.24% Variable APR on new purchases. There is an introductory APR offer for balance transfers; you’ll get an APR of 10.99% for 6 months from date of first transfer, for transfers that post to your account by September 10, 2019, then it will be 25.24% Variable APR.
Because it has such a strong rewards program for a secured credit card, the Discover it Secured Card doesn’t have many other benefits. However, Discover will automatically review your account after you’ve been a cardmember for eight months to see if it can transfer you to a credit card account with no security deposit. And it reports to the three major credit bureaus.
5. Citi Secured Mastercard
If you’re looking for a simple card with no annual fee, consider the Citi Secured Mastercard. If approved for the card, you’ll have to provide a security deposit. Your credit limit is equal to your security deposit; the minimum you can deposit is $200, and the maximum is $2,500.
The Citi Secured Mastercard has an APR of 24.74% for new purchases and balance transfers; there is no introductory offer. It also has a 3% foreign transaction fee if you use the card outside of the United States.
The card doesn’t have a rewards program, but Citi does report your activity to the three major credit bureaus.
If your card is lost or stolen, you’ll get access to Citi Identity Theft Solutions, a free program to help you resolve the problem.
Using a secured credit card
If you have bad credit or no credit at all, applying for a secured card is a great first step in building your credit history. To take full advantage of your new card, use it wisely and make all of your payments on time. After several months of managing your account, you’ll hopefully see your credit score increase — you could even qualify for a higher credit limit or a traditional credit card.