credit cards

How to pick a secured credit card

Leslie McFaddenQuestionDear Credit Card Adviser,
Please advise me on a good secured credit card to help build my credit score.
-- Peggy

AnswerDear Peggy,
Secured-card offers come and go, so I'll give you some general advice for selecting such a card.

A "good" secured credit card is one that automatically reports your payment history to the three major credit reporting agencies -- Equifax, Experian and TransUnion -- and charges a low annual fee.

If it doesn't report your payment history, you're not getting any "credit" for paying your credit card bill on time. Fortunately, all the secured credit cards in Bankrate's 2011 Credit Card Fees survey reported to the three major credit reporting agencies.

What's a typical annual fee? Annual fees on secured cards ranged from $18 to $40, according to our survey. None of the cards charged any other upfront fees.

Secured cards require you to pony up several hundred dollars, which will serve as collateral in case you default. If your cash flow is lacking, obviously you'll want to check out the minimum deposit requirements. Some credit cards will permit subsequent credit-line increases without an additional deposit, but in many cases your deposit will determine your credit limit. Some secured credit cards also will pay interest on your deposit, but expect paltry yields -- 0.1 percent was the most common return rate in Bankrate's survey.

I also would find out how quickly you'll be able to graduate to an unsecured credit card with that issuer and get your deposit refunded. Ask which cards you could potentially qualify for once you're eligible, and consider whether you'd actually want any of those cards.

Finally, if you're going to carry a balance month to month, compare interest rates before selecting a credit card.

Happy shopping!

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To ask a question of the Credit Card Adviser, go to the "Ask the Experts" page and select "Credit Cards." Read more columns by the Credit Card Adviser. Follow Leslie McFadden on Twitter.

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.


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