The best secured credit card with no annual fee is the Discover it® Secured Credit Card because it gives 1 - 2% cash back on purchases and has a 0% foreign transaction fee to go along with its $0 annual fee. The Discover it® Secured Credit Card also matches 100% of the cash rewards a new cardholder earns the first year. And it reports to all 3 major credit bureaus each month.
As you can see, there are several really good secured credit cards with no annual fee, and they're available even to people whose credit is damaged. Any no annual fee secured credit card is an excellent way to start building up a positive payment history and rebuilding one's credit score.
Eventually, it will be easier to qualify for unsecured credit cards with better terms. But unsecured cards for people with poor credit almost always charge annual fees.
There are a couple secured credit cards I like, that don’t charge annual fees. One of them is the Capital One Platinum Secured Credit Card, and the other is the Discover it® Secured Credit Card card. The Discover it® Secured Credit Card card is especially great, since it gives you cash back on all your purchases: 2% on gas stations and restaurants, and 1% on all other purchases.
I had a Citi® Secured Mastercard®, and it didn't have any annual fees. It's got no rewards, like Discover it® Secured Credit Card, but I didn't have any worries about getting approved. Also, the fees were super low, and it seriously bumped my score over 2 years. It was something like 100? Obviously, it didn't do it alone, but you gotta admit: that's pretty good.
Secured credit card fees are a lot lower than those charged by unsecured credit cards for people with bad credit. There are several secured credit cards with no annual fee, and many others won’t cost you much more than the average credit card, which charges about $16 per year. In contrast, unsecured cards for bad credit usually have a $75+ annual fee, plus a one-time fee near $90 for application processing. The tradeoff is that you have to place a refundable security deposit of at least $200 to enjoy low secured credit card fees. But unlike unsecured card fees, you’ll get your deposit back when you close your account.… read full answer
Annual fees aren’t the only secured card costs you have to worry about, though. There are foreign transaction fees, late fees and cash advance fees, too. Plus, if you carry a balance from month to month, you’ll have to pay interest.
But avoiding secured credit card fees is pretty easy. You just have to choose your card wisely and then use it responsibly.
The best approach is to choose whichever card has the lowest annual fee, regardless of branding or issuer. And either pay your bill in full every month or don’t use it to make purchases at all. Either way, your credit score will benefit from your account being in good standing, and you’ll avoid wasting money on interest.
Two downsides of getting a secured credit card are the required security deposit and the fact that your credit limit is likely to be low. All secured cards make you put up a deposit in order to open an account, and your credit limit typically equals the amount of the deposit. There are also a few other downsides to secured cards that are worth noting.… read full answer
Downsides of Getting a Secured Credit Card
Security deposit: You must put down a security deposit, usually at least $200-$300, to open the account. The deposit is refundable when you close the account with a $0 balance.
Hard credit pull: Almost all secured credit cards (and unsecured cards as well) require a hard credit pull when you submit an application. This will likely drop your credit score by around 5 to 10 points, but you should be able to bounce back after a few months of responsible credit use. It’s also worth noting that there are a few secured cards that don’t require a hard pull.
Low credit limit: A secured card’s credit limit is typically only as high as your security deposit, which will usually start at $200-$300. If you want a higher limit, you will have to deposit more money. There may be a cap on how much you can deposit, though.
Often no rewards: Some secured credit cards have rewards, but many do not. However, if you’re getting a secured card, it’s better to focus on credit building rather than rewards, anyway.
You can learn more about the pros and cons of secured credit cards on WalletHub. But at the end of the day, it’s important to remember that a secured card is one of the best options for people with damaged or limited credit who want to improve their score.
A secured credit card helps you build credit by reporting account information to at least one of the big three credit bureaus every month. Monthly credit reporting gives you the opportunity to add positive info to your credit report, which is the key to building credit. Whether the credit that you build with your secured card is good or bad depends on your ability to pay the bills on time. You can also build credit just by having a secured card open, even if you don’t use it to make purchases.… read full answer
If you use a secured credit card irresponsibly, maxing it out or missing payments, you’ll have negative information on your credit report. That can lead to a bad credit score. But on the flip side, responsible use of a secured card builds credit just as well as any unsecured card. The only difference between a secured card and an unsecured card is that secured cards require a security deposit and give you a credit limit equal to that deposit. Secured and unsecured cards look the same, both physically and on credit reports.
How Secured Cards Build Credit
All major secured credit cards report to 1-3 of the major credit bureaus on a monthly basis.
Secured credit cards report information about your payment history, balance, spending limit and more to the credit bureaus each month.
The information secured cards report to the bureaus contributes to your credit history.
Responsible use of a secured card results in positive information being reported, helping to cover up past mistakes or build out a thin file.
The key to building credit with a secured card is to never miss a due date, or to just never use your card. As long as your account is open and in good standing, you’re in good shape.
Keeping your statement balance below 30% of your credit limit will help you build credit faster with a secured card.
Secured cards are the best credit cards to use if building credit is your main objective. And they’re particularly useful for rebuilding credit after mistakes. Not only do secured cards report to the credit bureaus, but they also approve even applicants with bad credit. Some don’t even do a credit check. And secured cards are known for low fees. The high approval odds and low fees are all because of the refundable security deposit.
But just because all major secured credit cards can help you build credit does not mean they’re equally attractive. They differ in several important areas, including their annual fees, minimum deposit requirements and rewards. It’s important to shop around and pick the best card for you.
Personally, I'd go for the Capital One Platinum Secured Credit Card. It's a Mastercard, so it's accepted everywhere and Capital One is a respected bank with better customer service imo.
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