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Key takeaways
- Secured credit cards help you establish and build credit. Most require a refundable security deposit but not all.
- The top secured credit cards come with low annual fees, low APRs, and no credit check making them accessible to a broad spectrum of consumers.
- Choose a secured card with a deposit that fits your budget, low fees, and reports to all three credit bureaus.
If your credit is lacking or poor – below 580 – you may want to build credit. One of the best ways to do that is through credit cards. But how do you qualify for credit when you don’t have any? It’s a classic catch-22.
Secured credit cards may just be the answer you’re looking for. Most do require you to put down a cash deposit – but not all. And it’s possible to find ones with low to no fees.
Take a look at our 3 favorite secured credit cards designed to help you build and access credit.
Build Credit with Every Swipe
A New Way to Build Credit
Better than Prepaid…Get a Secured Credit Building Card!
Secured Credit Card Comparison
Credit Check
No
No
No
Recommended Credit Score
350-850
300-669
300-640
Minimum Security Deposit
None
None
$200, Refundable
Features
AutoPay so you never miss a payment.
Use your security deposit to pay your monthly balance.
Your interest rate won’t go up even if you’re late.
Current’s Build Card provides a unique path for people with no credit or poor credit to establish a credit history. Unlike your average secured card, it doesn’t require a security deposit or credit check. But you must have a Current Spend Account to apply.
The Chime Secured Credit Builder Visa® Credit Card1 is a rare find. You don’t have to undergo a credit check to apply, there’s no minimum security deposit requirement, nor is there an annual fee or interest charges. If these perks appeal to you, it’s definitely worth a look. But you do have to be a Chime2 banking customer to apply.
The Applied Bank® Secured Visa® Gold is a strong option for people starting to build or rebuild their credit. It’s easy to get, has a low minimum security deposit, and no penalty APR.
How Do Secured Credit Cards Work?
Secured credit cards require a deposit which becomes your credit limit. The deposit is refundable – if you close your account in good standing – and acts as collateral in case you don’t pay. This reduces the risk for the issuer making secured credit cards more accessible to people with limited or poor credit history.
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The credit issuer in turn reports your payment history and credit utilization to all three major credit bureaus. On-time payments and a low credit utilization ratio – below 30% – will help improve your credit score. Missed or late payments can hurt your score, just as they would with a regular credit card.
Secured vs. Unsecured Credit Cards
The biggest difference between secured and unsecured credit cards is that secured ones require a security deposit. An unsecured credit card or traditional credit card will never ask you for one.
Secured credit cards are also easier to get as many don’t check your credit score and are an excellent tool for building or repairing credit. It is possible to get an unsecured credit card for bad credit, but most cards in this category have high fees and low credit limits so it may not be a cost-effective option.
A good plan is to start with a secured credit card, build your credit, and graduate to an unsecured card with more benefits and rewards.
Perks and Drawbacks of Secured Credit Cards
Perks:
Lenient application requirements make it possible for people with bad or no credit to be approved.
Helps build or rebuild credit by reporting to all three major credit bureaus.
Often lower interest rates compared to unsecured cards for bad credit.
Some secured credit cards come with benefits like fraud protection and credit monitoring.
Access to credit when you need it for purchases like hotel reservations or car rentals that don’t accept cash.
Secured credit cards help to keep your spending in check since you can only spend what you’ve put down as a security deposit.
The security deposit is refundable when you close your account in good standing.
Drawbacks:
Requires a security deposit, which can be a problem if money is tight.
Typically lower credit limits than unsecured credit cards, so it may not be sufficient for your needs.
Fewer rewards and perks compared to standard credit cards.
Secured cards focus on credit building and lack features like welcome offers, intro APRs, and other perks.
Who Are Secured Credit Cards Best For?
Secured credit cards are a financial tool best for anyone looking to build or rebuild their credit.
1. Credit Rebuilders
If you’ve made credit mistakes in the past – carried too much debt, made late payments, defaulted on a loan, or filed for bankruptcy – then a secured credit card is a practical way to improve your credit score. Most have lenient approval criteria and many don’t check or credit or require a minimum credit score to apply. For anyone who has bad credit – considered a FICO score of 580 or lower – a secured credit card can be the way to go.
2. Newbies
Individuals starting their credit journey should consider a secured credit card. Being approved for a regular credit card can be challenging when you have no credit history. A secured card offers a pathway into the world of credit. Build your credit, show responsible credit habits, and you’ll be able to access cards with more rewards in the future.
3. Students
Young adults at the beginning of their financial journey usually need help establishing a credit history. Secured credit cards are an excellent starting point as they provide an easy and safe way to build credit and learn responsible credit behavior.
Tips on Choosing the Best Secured Card for You
1. Consider the Security Deposit
Look for cards with flexible deposit options that suit your budget. Consider both the minimum and the maximum security deposit and how it is paid. Some issuers want you to link your bank account while others will accept checks or money orders.
2. Ask About Upgrading in the Future
Secured credit cards are a good starting point, but most people don’t want to stay there. Find out if your issuer offers the option to upgrade to an unsecured card once your credit has improved. While it’s always a good idea to see what other cards are available, if you upgrade you usually don’t have to undergo a hard credit check.
3. Check the Fees
Watch out for common credit card fees. These include annual fees, application fees, and penalty APRs. Some fees are avoidable like late payment fees and foreign transaction fees, but you should still be aware of what they are.
4. See if You Can Prequalify
A lot of secured credit cards don’t do a credit check, but if the one you’re interested in does, first see if you can prequalify. Prequalification gives you a better idea of whether you’ll be approved or not without a hard credit pull.
5. Make Sure It Reports to All 3 Credit Bureaus
Before you put down a security deposit on a secured credit card, make sure it’s going to help you build credit. The issuer must report your payment history to all three major credit bureaus – Experian, Equifax, and TransUnion. That way your good credit habits – on-time payments, paying in full, low utilization – won’t go unnoticed.
Final Thoughts
If you have bad credit or none at all, don’t despair. There are lots of easy-to-get credit cards that can help you build credit and get back on track.
Secured credit cards offer an easy way to get and build a strong credit history. All you have to do is use it responsibly – pay your bills on time and in full and keep your credit utilization low – then you’ll be on your way to a good credit score and your choice of credit cards that offer rewards and perks.
A Note on Chime Products:
1 To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Chime Checking Account. The qualifying direct deposit must be from your employer, payroll provider, gig economy payer, or benefits payer by Automated Clearing House (ACH) deposit OR Original Credit Transaction (OCT). Bank ACH transfers, Pay Anyone transfers, verification or trial deposits from financial institutions, peer to peer transfers from services such as PayPal, Cash App, or Venmo, mobile check deposits, cash loads or deposits, one-time direct deposits, such as tax refunds and other similar transactions, and any deposit to which Chime deems to not be a qualifying direct deposit are not qualifying direct deposits.
2 Chime is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC.
3 Money added to Credit Builder will be held in a secured account as collateral for your Credit Builder Visa card, which means you can spend up to this amount on your card. This is money you can use to pay off your charges at the end of every month.
4 On-time payment history may have a positive impact on your credit score. Late payment may negatively impact your credit score. Chime will report your activities to Transunion®, Experian®, and Equifax®. Impact on your credit may vary, as Credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.
5 Based on a representative study conducted by Experian®, members who made their first purchase with Credit Builder between June 2020 and October 2020 observed an average FICO® Score 8 increase of 30 points after approximately 8 months. On-time payment history can have a positive impact on your credit score. Late payment may negatively impact your credit score.
