Not all credit cards are created equal. Some let you earn cash, airline miles, and other perks, while others help you build — or rebuild — your credit.
This is the case with secured credit cards, at least.
If you have bad credit or no credit history, a secured credit card can be a good way to build a positive payment history and boost your credit score. An online marketplace can also guide you on ways to repair your credit. Register now for a free consultation.
What is a secured credit card?
A secured credit card is a deposit-backed card. You pay the credit card issuer an initial security deposit – which often varies between $50 and $300 – and you get a credit line equal to this amount. (If you deposit a deposit of $150, for example, your card will have a spending limit of $150).
You can then use the credit card for purchases like you would any other card and pay it back each month to your issuer. They then report these payments to the three major credit bureaus – Experian, Equifax and TransUnion, which helps you build your credit and increase your credit score.
If you’re unsure of your current credit score, don’t worry: there are several ways to check your score (and overall credit health) via online tools.
Most credit card secured deposits are refundable, so you’ll be refunded when you close the account or establish a solid history of on-time payments. Some secured cards also have a graduation component, which allows you to switch from a secured card to a traditional credit card after a certain period of time – usually after several months (or more).
How to get a secured credit card
To obtain a secured credit card, you will need to complete an application with the credit card company. Most major banks and card issuers offer secure cards. You can compare and contrast card issuers and offers through an online marketplace to get an idea of which is best for you. If you are concerned about your current creditworthiness, consider seeking professional advice. There are companies that can help you repair your creditimprove your credit score and prepare for a prosperous financial future.
Since secured cards are designed to help you increase your credit, most card companies do not require a minimum credit score to qualify. However, approval is never guaranteed, and you will need to provide personal information such as your social security number, address, and bank details when applying. You must also be at least 18 years old.
How do I get the most out of my secured credit card?
To get the most out of your secured credit card, it is essential that you pay off your balance each month and on the due date assigned to you. Since your card issuer reports your payments to the credit bureaus, not paying (or paying late) could tarnish your credit history and lower your credit score.
If you consistently make your payments on time, you can usually expect to establish a solid credit score in about six months. according to Experian. Most secure cards include a credit score monitoring feature that allows you to track your score over time. If your card doesn’t have this feature, you should be able to get your credit score monitored through your bank, or you can purchase your score from Equifax, TransUnion, or Experian at any time.