When used responsibly, secured credit cards can help you build or rebuild credit. Working on your credit will get you closer to qualifying for cards with better features and benefits.
Before applying for a secured card, you should correct any errors on your credit report. Inaccurate information in your credit history could cause issuers to deny your card applications. Be mindful of any recent name or address changes, as this can affect your credit.
Once you're ready to apply, here’s what to consider when choosing a secured credit card that’s right for you:
What’s the security deposit?
Before applying, check to make sure the card’s minimum and maximum security deposits fit your budget. A deposit could be as low as $49 or as high as a few thousand dollars, depending on the card and the issuer. Some cards require a bank account to pay for the deposit, while others allow payment by check or money order.
Is there a path to upgrade?
Some secured cards will let you upgrade to an unsecured version of the card once your credit has improved. While it’s a good idea to see what other cards are available to you, upgrading with the same issuer is an easy way to graduate to an unsecured credit card without going through a hard credit check.
Does it charge extra fees?
On top of higher interest rates, watch out for common credit card fees. With the right card and careful use, you can avoid late payment fees, foreign transaction fees and penalty APRs. It’s still a good idea to know what your potential card will charge if you miss a payment.
Can I prequalify?
While secured cards are among the easiest to qualify for, some issuers won’t give cards to consumers with past bankruptcies, high levels of debt or low income. Depending on your financial situation, consider looking at cards that let you see if you are prequalified before you apply. Doing so can give you a better idea of how likely you are to be approved for a card and potentially help you avoid a hard credit pull for a card you aren't likely to be approved for.
Try it out: Bankrate’s CardMatch™ feature is an easy way to find a selection of cards you may be prequalified for.
Does it report to at least one of the three credit bureaus?
Reports of good payment behavior to Equifax, Experian or TransUnion are essential for building or repairing credit. Make sure that the issuer will report your card usage to at least one of the bureaus so that your good habits — on-time payments, paying in full, low utilization and more — don’t go unnoticed.