A secured credit card is a type of credit card that requires the cardholder to deposit cash as collateral before using the card. The deposit usually acts as a credit line for the card, and the cardholder can only spend up to the amount on the deposit.
But, if users are looking for the best-secured credit card here is one that can get some rewards on purchases with zero annual fees.
These credit cards are often used by people with limited credit histories, as they can help build or rebuild credit. When used responsibly, a secured credit card can help improve the cardholder’s credit score over time. The credit card issuer reports payment activity to the major credit bureaus, which helps improve credit.
However, it often comes with higher fees and interest rates than traditional credit cards. If the cardholder fails to make payments on the card, the issuer may use the deposit amount as payment, resulting in the loss of the entire deposit amount.
Many providers offer these types of credit cards with zero annual fees to users. Users can also avail of rewards on their shopping or purchases apart from credit scores.
What is a Secured Credit Card?
A credit card is a type of credit card that requires you to deposit cash with the card issuer. If you want a credit limit of $1000, you would need to deposit $1000 to the card issuer.
Therefore, when you apply for this card, required to deposit cash equal to your desired credit limit. Cash deposits act as collateral, which is used in case you fail to make bill payments.
Why Need a Secured Credit Card?
These Secured credit cards are often used by people who have limited credit scores and want low fees with a rewards program. As they may have difficulty getting approved for traditional unsecured credit cards. So this type of credit card helps in boosting their credit score, as it informs the credit bureaus about every payment.
There is a card that offers zero annual fees along with reward programs. Of course, it will be the best card, otherwise, you have to pay a $30 to$45 annual fee.
Hence, users are required to make timely payments and keep their balance low, thus cardholders can improve their credit scores. And can eventually qualify for a traditional unsecured credit card with better terms and benefits.
Eligibility Criteria
The eligibility criteria for a secured credit card vary depending on the card issuer. Still, some of the common eligibility criteria are as follows:
- Age Limit: The cardholders must be 18 years of age but in some cases 21 years.
- Income: The cardholder must have a reliable source of income, such as a job, self-employment, or other sources.
- Security Deposit: The cardholder must be able to make a cash deposit, usually between $200 and $2500, which will serve as collateral for the card.
- Credit History: It all depends on the card issuers, some require credit history and some do not.
- Identity Proof: The cardholder must have a driving license or passport or other documents that are valid identification issued by the government.
Even so, there is no guarantee of approval for your secured credit card. The issuer may also consider other factors, such as debt-to-income ratio, payment history, and others.
Benefits of Secured credit card
There are several advantages of secured credit cards as they are often easier to obtain than traditional unsecured credit cards. Because the requirement of a cash deposit as collateral poses less risk to the card issuer. It helps in increasing credit scores more than unsecured credit cards as it reports to credit bureaus.
Advantages:
- Easy & Quick Approval: It is often easier to get approved for a secured credit card than a traditional unsecured credit card.
- Reward Programs: There are a few secured credit cards that offer rewards programs, which allow the cardholder to earn points or cash back for purchases.
- Fraud Protection: Most secured credit cards offer fraud protection i.e. the cardholder is not liable for unauthorized transactions.
- Convenience: A secured credit card can be used for shopping, online transactions, and travel like any other credit card.
- Improve Credit Score: Regular, timely payments can help improve a reasonable credit score, as the card issuer will report payment activity to the major credit bureaus.
- Build Good Credit History: This helps build a positive credit history, which can be important in the future for accessing other credit products such as loans or mortgages.
Best Secured credit card providers list
Many providers offer secured credit cards with rewards programs. Below is the list of all the providers which are as follows:
- Citi Secured MasterCard
- OpenSky Secured Visa Credit Card
- Capital One Platinum Credit Card
- Wells Fargo Secure Credit Card
- US Bank Secured Visa Credit Card
1. Citi secured a master credit card
Citibank-secured master credit cards require a cash deposit with Citibank, which acts as collateral. It helps increase your credit limit and the maximum deposit amount can be up to $2,500.
2. Capital One platinum credit card
The credit card company offers this type of credit card with a limit of up to $1,000 for customers. And by making only five monthly payments ahead of time, one can achieve higher credit scores. Apart from credit scores, users can also avail of rewards programs.
3. OpenSky Secured visa credit card
This secured credit card also requires a cash deposit, which acts as collateral and can help increase the credit limit. The credit limit can be as high as a deposit of up to $3,000.
4. Wells Fargo Secured Credit Card
Wells Fargo offers a secured credit card that helps individuals rebuild their credit while giving them access to cash advances.
5. US Bank Secured Visa Credit Card
US Bank offers the Secured Visa Credit Card, which can help individuals establish their credit while earning rewards.
However. all those come with higher fees and interest rates than a traditional unsecured credit card. Also, if a user fails to make the payment then the deposit amount is used as payment, which is the loss of the entire deposit amount.
Disadvantages:
Here are some of the disadvantages commonly found in secured credit cards:
| SL No | Key Features | Details |
|---|---|---|
| 1 | Fees | Annual Fee, Balance Transfer Fee, Cash Advance Fee, etc. |
| 2 | Interest rates | Higher interest rates |
| 3 | Credit Limit | The credit limit on these cards may be lower than other credit cards. |
| 4 | Limited Rewards | It offers limited rewards or none at all, compared to unsecured credit that offers generous rewards programs. |
A Secured Credit Card with Rewards and Zero Fees
Discover It Secured Credit Card is one of the best-secured credit cards with zero annual fees along with reward programs. You can earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter.
How to increase your credit score?
To increase your credit scores, use your credit card responsibly, by making on-time payments and keeping your balances low, to reap the maximum benefits and avoid potential negative effects on your credit score.
FAQs
A: The “Discover it” provides zero annual fees secured credit cards for the user.
A: The Capital One Secured Credit Card annual fee is $35.
A: A secured credit card is the best option to increase your credit scores. You have to pay on time of your credit card bills. But, general credit cards (unsecured credit cards) also help to increase your credit scores.
Conclusion
A secured credit card is important for the user to build credit scores in a short period. There are many credit card providers in the market, who offer the best credit cards and also offer reward programs along with credit scores. Hence, make the payments on time to avoid a negative impact on your credit score.
