For people with bad credit, secured credit cards can be a helpful way to rebuild credit while also offering them a secure and convenient method of payment. Secured cards differ from other credit cards because they require the cardholder to pay a refundable security deposit, which typically becomes the amount of the card’s credit limit. Other than the security deposit and credit limit, secured credit cards work essentially the same way as any other credit card.
Secured card users receive a statement every month and must make a monthly payment. Also, the physical card is indistinguishable from other cards, so when you use your card to make a payment, no one will know that you aren’t using a standard credit card. Secured cards are often less expensive than the unsecured credit cards that are available to people with bad credit, which invariably have very high, nonrefundable fees. Another benefit of most secured cards is that the issuers report your balance and payment history to the three major consumer credit bureaus: Equifax, Experian, and TransUnion.
So if you’re using your card responsibly, it may help build your credit. Once your credit improves, your card issuer may allow you to move from a secured card to an unsecured card without closing your original line of credit. In fact, many secured card users find that after just a year of responsible use, they’re able to qualify for a standard, unsecured card. When that happens, they can close their secured card account and receive a refund of their deposit. Beyond building credit, there are other features for the top secured credit cards that may hold different value for different people. Whether you want to pay a smaller deposit, earn cash back or potentially get a high credit limit, there’s a secured card out there for you.
How we chose the top secured credit cards
To find the top secured credit cards, we first divided the market into the following six categories:
- Top secured cards requiring a smaller deposit
- Top secured cards earning flat rate cash back
- Small business secured cards
- Top secured cards for first year rewards
- High potential credit limit secured cards
- Simple secured cards
Then, we looked at more than a dozen major card issuers and credit unions to find the top cards in each of these subcategories. We included only cards that are available to all applicants, leaving out products offered by credit unions that not everyone can join. Since secured credit cards tend to be most appealing to applicants with poor or limited credit, the top secured cards don’t have an annual fee. And for each category, we looked at the most relevant factors. For example, the top secured small business card needs to have a large credit limit for business purchases, while the top secured cards for rewards must offer the most value for your spending. While credit card terms may change from time to time, the following rankings reflect information that was accurate in September 2021.
Top secured cards requiring a smaller deposit
Most secured cards require a security deposit of at least $200. But if you don’t have enough spare cash for that, a secured card with a smaller deposit minimum may be right for you. When we were looking at top secured cards requiring a smaller deposit, the amount of the deposit was obviously the most important factor, but we also wanted a full featured card from a reputable card issuer.
If you want a secured card requiring a smaller deposit: Capital One Mastercard
If you don’t have a lot of extra cash, putting down a smaller than average deposit on a secured card may be helpful. With the Capital One Mastercard, you may be able to put down a refundable security deposit starting at only $49 or $99 and still get a $200 initial credit line. (However, depending on your credit score, you might still have to make a $200 deposit.) After making on-time payments, cardholders may be able to earn back their security deposit as a statement credit. Cardholders will also be automatically considered for a higher credit line in as little as six months with no additional deposit needed. The variable APR for this card is 26.99% and there’s no balance transfer option. The card is open to applicants with limited or bad credit, and there’s no annual fee for this card.
Top secured cards earning flat rate cash back
Applicants used to have to forgo cash back rewards with a secured card, but now there are a few secured credit cards that do earn cash back. When choosing the top secured cards for earning cash back, we looked for a simple but effective earning structure, while balancing the other features that a cardholder would want from a secured card.
If you want a secured card for earning flat rate cash back: Bank of America Unlimited Cash Rewards Secured
The Bank of America Unlimited Cash Rewards Secured card has one of the most generous earning rates for a secured card. Cardholders earn an unlimited 1.5% cash back on all purchases. A minimum refundable security deposit of $300 (up to a maximum of $4,900) is required to open the account. The maximum credit limit will be determined by the amount of the security deposit, income, and ability to pay the credit line established. As a cardholder, your account will be reviewed periodically to determine if you qualify to have your security deposit returned. Qualification for that is based on your overall credit history, including your account and overall relationship with Bank of America, as well as other credit cards and loans. Not all customers will qualify to have their security deposits returned. There’s a 23.99% APR with this card, and balance transfers are allowed with a fee of 3% of each transaction and a minimum of $10. There’s no annual fee for this card.
Top secured cards for small business use
Individuals aren’t the only ones who could benefit from a secured card. Small business owners may want to take advantage of these offers as well. While there aren’t too many secured credit cards available specifically for small businesses owners, we looked through for one with a large credit line for business purchases as well as bonus features for small businesses.
If you want a secured card for small business use: Wells Fargo Business Secured Card
The Wells Fargo Business Secured Credit Card is a top choice for businesses with little to no business credit history or with past credit challenges. The card offers small business owners a credit line between $500 and $25,000, based on the amount of the security deposit. Small business owners who use the card responsibly over a period of time may be eligible to upgrade to an unsecured business credit card. Small business owners can choose to earn either cash back or points with this card. If you opt for cash back, the card will earn an unlimited 1.5% cash back on new purchases. Cash back will be credited to your account or to your eligible checking or savings account each quarter. With points, the card will earn 1 point on every $1 spent, plus 1,000 bonus points every billing cycle when you spend at least $1,000 on qualifying purchases. Points can be redeemed for things like gift cards, merchandise, and airline tickets, plus get a 10% points credit when you redeem your points online. Small business owners can add up to 10 employee cards, and there’s no annual fee for this card.
Top secured cards for first year rewards
Since secured cards are most useful for building, restoring, or establishing credit, it may not be necessary to hold them for a long period of time. That’s one reason that a top secured card that maximizes your first year rewards may be important to you. When we were looking at top secured cards for first year rewards, the first year rewards had to be much better than normal offerings on other cards, but it was also important that the card have valuable features and benefits and that it was issued by a reputable card issuer.
If you want a secured card for first year rewards: Discover it Secured Card
The Discover it Secured card is a top card for first year rewards, and it has a solid earning rate as well. The card has a refundable security deposit starting at $200. After eight months, you may automatically qualify to convert to an unsecured card and get your deposit back. The card also earns 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter, and an unlimited 1% cash back on all other purchases. With the card’s Cashback Match feature, you get an automatic unlimited dollar-for-dollar match for all the cash back you’ve earned at the end of your first year, making it easy to earn substantial rewards during your account’s first year. This card has a 22.99% standard APR, but a 10.99% introductory APR offer for 6 months for balance transfers that post to your account by December 10, 2021. There’s no annual fee for this card.
Top secured cards with a high potential credit limit
Most secured cards have a small potential credit limit. But if you tend to make large purchases, then you may want to look for a secured card with high potential credit limits. Just keep in mind that to utilize a secured card’s high potential credit limits, you also probably have to make an equally high security deposit. When we were looking for the top secured cards with high potential credit limits, the credit limit was obviously the most important factor, but we also considered extra features.
If you want a secured card with a high potential credit limit: US Bank Secured Visa Card
With the U.S. Bank Secured Visa Card, your credit line is the same amount as your deposit, which can be up to $5,000. The deposit must be at least $300 and must be in hundred-dollar increments. Otherwise, this is a very simple card that doesn’t offer rewards for spending. It has a 23.99% standard APR and a 3% or $5 minimum balance transfer fee, whichever is greater. There’s no annual fee for this card.
Top simple secured cards
If you’re looking for a secured credit card, you may not need any bells or whistles. Sometimes, you just want a basic secured card without rewards that can encourage you to overspend or incur debt. For the top simple secured cards, we looked for cards with a credit limit that matched the security deposit for ease of use. Keep in mind that simplicity also means that these cards don’t offer rewards and may not include other benefits that similar cards might offer.
If you want a simple secured card: BankAmericard Secured Credit Card
The BankAmericard Secured Credit Card is a straightforward secured card from a major bank that doesn’t offer any rewards or special features. A minimum refundable security deposit of $300 (maximum of $4,900) is required to open this account. Your maximum credit limit will be determined by the amount of the security deposit you provide, your income, and your ability to pay the credit line established. Your account will be reviewed periodically to see if you qualify to have your security deposit returned. This card has a 22.99% APR and a balance transfer fee of 3% of each transaction, with a $10 minimum. There’s no annual fee for this card.
Building credit through secured credit cards can help you build up a positive credit history for when you’re trying to apply for a mortgage, car loan, apartment, or any other type of credit. By making timely payments and avoiding debt, you may be able to build or rebuild your credit more quickly and easily than you might have thought.
This article originally appeared on lanterncredit.com and was syndicated by MediaFeed.org.
Lantern by SoFi:
This Lantern website is owned by SoFi Lending Corp., a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license number 6054612; NMLS number 1121636. (www.nmlsconsumeraccess.org)
All rates, fees, and terms are presented without guarantee and are subject to change pursuant to each provider’s discretion. There is no guarantee you will be approved or qualify for the advertised rates, fees, or terms presented. The actual terms you may receive depends on the things like benefits requested, your credit score, usage, history and other factors.
*Check your rate: To check the rates and terms you qualify for, Lantern conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender(s) you choose will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
All loan terms, including interest rate, and Annual Percentage Rate (APR), and monthly payments shown on this website are from lenders and are estimates based upon the limited information you provided and are for information purposes only. Estimated APR includes all applicable fees as required under the Truth in Lending Act. The actual loan terms you receive, including APR, will depend on the lender you select, their underwriting criteria, and your personal financial factors. The loan terms and rates presented are provided by the lenders and not by SoFi Lending Corp. or Lantern. Please review each lender’s Terms and Conditions for additional details.
Student Loan Refinance:
Student loan refinance loans offered through Lantern are private loans and do not have the debt forgiveness or repayment options that the federal loan program offers, or that may become available, including Income Based Repayment or Income Contingent Repayment or Pay as you Earn (PAYE).
Notice: Recent legislative changes have suspended all federal student loan payments and waived interest charges on federally held loans until 01/31/22. Please carefully consider these changes before refinancing federally held loans, as in doing so you will no longer qualify for these changes or other future benefits applicable to federally held loans.
Auto Loan Refinance:
Automobile refinancing loan information presented on this Lantern website is from Caribou. Auto loan refinance information presented on this Lantern site is indicative and subject to you fulfilling the lender’s requirements, including: you must meet the lender’s credit standards, the loan amount must be at least $10,000, and the vehicle is no more than 10 years old with odometer reading of no more than 125,000 miles. Loan rates and terms as presented on this Lantern site are subject to change when you reach the lender and may depend on your creditworthiness. Additional terms and conditions may apply and all terms may vary by your state of residence.
Secured Lending Disclosure:
Terms, conditions, state restrictions, and minimum loan amounts apply. Before you apply for a secured loan, we encourage you to carefully consider whether this loan type is the right choice for you. If you can’t make your payments on a secured personal loan, you could end up losing the assets you provided for collateral. Not all applicants will qualify for larger loan amounts or most favorable loan terms. Loan approval and actual loan terms depend on the ability to meet underwriting requirements (including, but not limited to, a responsible credit history, sufficient income after monthly expenses, and availability of collateral) that will vary by lender.
Information about insurance is provided on Lantern by SoFi Life Insurance Agency, LLC.
More from MediaFeed:
25 smart ways to split household expenses
Featured Image Credit: DepositPhotos.com.