Ryan P Page, Staff Writer
@ryan_page
Getting a secured credit card is a good idea if you need to build or rebuild your credit. A secured card is the easiest type of credit card to get approved for, and you can get better rewards and lower fees than you would from an unsecured card for bad credit.
Why Getting a Secured Credit Card is a Good Idea
Secured card deposits are refundable
While the upfront cost of a secured credit card may be daunting, the deposit is fully refundable if you pay off your card before closing your account. As a result, secured cards can be cheaper in the long run than many unsecured cards for people building credit.
Secured credit cards can help you build credit
One of the primary reasons that people with bad or limited credit should consider a secured card is to build credit. If your secured card’s issuer reports your credit information to the major credit bureaus every month and you manage the account responsibly, it will help you build credit over time. In particular, you need to make sure to pay your bill by the due date every month.
Secured cards are easy to get
Secured cards are easier to get than unsecured cards thanks to their required deposit. The deposit acts as collateral for the issuer, so banks and credit unions are willing to offer these types of cards to a broader range of potential customers.
Many secured cards don’t charge annual fees
Unsecured cards for bad credit typically come with annual fees, monthly fees, and even one-time fees for application processing. Many secured credit cards cost nothing to own, aside from the refundable deposit.
You can earn rewards with a secured credit card
Some secured credit cards allow cardholders to earn better rewards on purchases than unsecured cards for limited or bad credit. Credit card rewards are a great way to save money on everyday purchases, which can be especially helpful for people who have limited income.
While getting a secured credit card is a great idea for some people, it may not be necessary for others. People with good or excellent credit will likely save more money with an unsecured card that gives better rewards or even a 0% intro APR for a limited time. In addition, students looking to build their limited credit should consider a student credit card because they’ll be able to get a better deal.
Ultimately, you will need to know your current credit score to determine which card is best for you. You can check using WalletHub’s free credit score tool.
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People also ask
What are the pros and cons of secured credit cards?
Secured credit cards have both pros and cons, just like any other type of credit card, but their advantages ultimately outweigh the disadvantages. Most importantly, secured credit cards are inexpensive, easy to get, and capable of helping you improve your credit score.
It’s also worth noting that secured card approval is not guaranteed, although the odds are far higher than with an unsecured card.
Pros & Cons of Secured Credit Cards
| Pros | Cons: |
What are two downsides of getting a secured credit card?
Two downsides of a secured credit card are the required security deposit and high interest rates. You need to place a deposit to open a secured credit card account, and your credit limit typically equals the amount of the deposit.
Carrying a balance from month to month doesn’t really make sense as a result, since it basically entails paying interest on a loan to yourself. But if you happen to rack up interest charges,...
read full answer by Adam McCann, Financial WriterDo secured credit cards help build credit?
Yes, secured credit cards help build credit if you keep them in good standing by paying the monthly bill on time. This is important because all major secured cards report to 1-3 major credit bureaus each month. Using a secured credit card responsibly is actually one of the best ways to build credit because secured cards are relatively inexpensive and easy to get, and there is no difference between using a secured credit card versus an unsecured card as far as building...
read full answer by WalletHub, Financial CompanyDid we answer your question?
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