Compare Secured Credit Cards

Yes, secured credit cards are worth it for people with limited or bad credit who are looking to build their credit and can afford to put up a security deposit. Secured credit cards often have $0 annual fees, rewards and high approval odds, and they can help you improve your credit score if you pay the bills on time.

When a Secured Credit Card Is Worth It

• When you have limited or bad credit. Secured credit cards are good for people with bad or limited credit because they are easy to get, thanks to the collateral requirement that reduces the risk for the issuer. Some secured cards don’t even require a credit check when you apply. On the other hand, people with higher credit scores can get cards with no deposit requirement, better rewards and/or lower interest rates.
• When you are looking to build credit. The primary purpose of a secured credit card is to build credit. If that is your main objective and you want an easy credit card to get, these cards are much more cost-effective than unsecured alternatives for bad credit.
• When you can afford the security deposit. A secured card requires a security deposit, which is usually a minimum of $200 to $300, to open the account. The amount of this deposit usually becomes your credit limit. You won’t have access to your deposit again until you close the account with a $0 balance or upgrade to an unsecured card.
• When you know you can pay on time. Making late payments hurts your credit score, which defeats the purpose of using a secured card. Ideally, you should not only pay on time each month, but also pay your balance in full. That way, you will build your credit as efficiently as possible while avoiding interest charges.

It’s worth noting that there are also unsecured credit cards for bad credit, and it’s fair to wonder whether secured cards are worth it compared to them. In general, these unsecured cards often have expensive, non-refundable annual fees (while secured cards often have $0 annual fees), and their APRs tend to be higher because of the lack of collateral. However, some unsecured credit cards for people with no credit may be better than their secured card alternatives.

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.

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.

You can get a secured credit card by going to your bank or credit union and asking for an application, or by applying for a secured card online. Not all banks and credit unions offer secured credit cards, so it’s best to take a look at the secured card offerings that are available online. That way, you can compare cards and apply for one that’s right for your situation. Annual fees, deposit amounts, rewards and interest rates vary from card to card, so it’s important to shop around to get the best deal.

Here’s how to get a secured credit card:

1. Compare secured credit cards to find the right card for you. Lots of people focus on the minimum deposit amount when it comes to secured cards, but the deposit is refundable. It’s smart to consider annual fees, which aren’t refundable. Look for the handful of secured cards that have no annual fee.
2. Fill out an application. You need to be at least 18 years old and have a Social Security number, an ITIN or a passport, along with a non-P.O. Box U.S. address. In addition, most secured credit card applications require you to choose your deposit amount, which will usually become your credit line. How and when you pay your deposit will depend on the card issuer. When you apply, you should be prepared to provide your bank account information or open a savings account with the card issuer to pay the deposit, but some card issuers let you pay the deposit later.
3. Wait for a decision. Credit card applications are often processed instantly. But if not, many card issuers have a website or phone number to check your application status.
4. Wait for your credit card in the mail. After you pay your deposit, your card will be mailed to you. This could take anywhere from a few days to a few weeks.

When applying for any credit card, there can be some worry that your application will be denied. Because secured credit cards are designed for people with bad or no credit history, secured card applicants have the least to worry about in this regard. That doesn’t mean there are no requirements, however.

In addition to placing a security deposit of $49-$300, secured credit card applicants are required by law to submit certain information for identity and income verification purposes. Many individual issuers have instituted their own secured credit card requirements as well.

Altogether, three types of information may be evaluated after you apply:

• Basic Information: All issuers require applicants to provide their name, contact info (including a non-P.O. Box U.S. address), Social Security number, and all other basic information requested on the account application.
• Income Information: All issuers require applicants to list their income in order to determine whether or not they can afford minimum payments on a new credit card.
• Credit Data: Certain issuers will not approve applicants who are delinquent on other credit card and loan accounts and/or applicants who have recent bankruptcies on their credit reports.

Overall, it’s much easier to get a secured credit card than an unsecured one. Due to the required security deposit, the card issuer’s risk is little to none, so many people with damaged or no credit can get a secured card. And they report to credit bureaus just like an unsecured card does, so you build credit in the process. If you use the card responsibly by paying your bill on time and maintaining low credit utilization, your credit standing will gradually go up, along with your chances of getting approved for an unsecured credit card.

A secured card can build credit in as little as one month if you have no prior credit history. For people with bad credit, meaning a credit score below 640, it could take around 12 to 18 months to build fair-to-good credit with a secured card. This is assuming that you maintain a history of on-time payments and manage your finances responsibly.

Technically, you build credit every month with a secured credit card, but pinpointing precisely how fast a secured card can get you to good credit is difficult, as every cardholder’s situation is different. Nevertheless, you can check out WalletHub’s free credit score simulator to see how various scenarios are likely to affect your credit score and gain a better understanding of how fast a secured card could build your credit.

Building Credit With a Secured Card

Using a secured credit card responsibly is the best way to build credit. Secured credit cards are cheaper and easier to get than unsecured cards for bad credit. Plus, secured cards report to the major credit bureaus the same way as unsecured cards.

Yes, you can be denied for a secured card if you have major negative items on your credit report such as an ongoing or recently discharged bankruptcy, collection accounts, or repossessions. You could also be denied if you don’t meet the issuer’s minimum requirements for approval. Those requirements typically include being at least 18 years old with a physical U.S. address, a Social Security number, and the ability to make payments on the account every month, among others.

Other common reasons you’d be denied for a secured card might be incomplete or inaccurate information on your application, not enough funds to cover the required security deposit, or delinquencies on other payment obligations. If you are denied for a secured credit card, consider applying for one of our editors’ picks for the best no credit check credit cards, which are easier to get approved for than normal secured cards. You can also sign up for a WalletHub account and get free personalized credit analysis and advice on how to improve your credit score.

Secured credit cards have both pros and cons, just like any other type of credit card, but the advantages of secured cards ultimately outweigh the disadvantages. Most importantly, secured credit cards are inexpensive, easy to get, and capable of helping you improve your credit score

Pros and Cons of Secured Credit Cards

One of the biggest pros of secured credit cards is that they’re available to customers with poor or limited credit. Secured cards also report account activity to the major credit bureaus just like unsecured cards do. This means cardholders can begin to rebuild or establish credit by using the card responsibly. In addition, secured cards usually have lower fees than unsecured credit cards for people with less-than-good credit.

Among the biggest cons of secured credit cards is the fact that cardholders need $200+ to spare for a refundable security deposit. These funds usually don’t accrue interest while securing the account, either. Plus, your credit limit equals the amount of your refundable deposit, so you won’t be able to borrow money for expenses you cannot already afford.

It’s also worth noting that secured card approval is not guaranteed, although the odds are far higher than with an unsecured card.

Bottom Line: Is a Secured Credit Card Worth it?

Yes, a secured credit card is worth it if your objective is to establish or rebuild credit and you make timely payments every month. When used responsibly, secured credit cards have far more pros than cons.

After all, it’s better to place a refundable deposit that you’ll get back upon closing your account with a $0 balance than it is to pay expensive, non-refundable fees. Such fees are all too common among unsecured credit cards for bad credit in particular. Secured and unsecured cards also appear no different on credit reports.

If you’re looking for long-term financing or an abundance of rewards, however, a secured credit card may not be for you. But it might be a necessary stepping stone for you to get the credit card you really want.

Just remember that even though secured cards are the easiest credit cards to get, you’ll still need some kind of income to be approved. A major negative on your credit report such as non-discharged bankruptcy may also prevent you from qualifying.

Most secured credit cards require a deposit of at least $200. And the minimum deposit required is always a good place to start. Simply opening an account is the most important thing at this point, as it will allow you to begin rebuilding your credit. In other words, depositing the minimum lets you get started right away without having to worry about giving up too much cash.

Plus, the beauty of using a secured credit card is that you can add to your deposit over time. That gives you a higher spending limit, which allows you to improve your credit utilization and boost your credit score. In general, the more available credit you have, the more favorably credit scores treat you. Just bear in mind that most secured credit card issuers won’t allow your total deposit to exceed $5,000.