Not all credit cards are created equal. Some allow you to earn cash, airline miles, and other benefits, while others help you build (or rebuild) your credit.
At least that’s the case with secured credit cards.
If you have poor credit or no credit history at all, a secured credit card can be a great way to create a positive payment history and build your credit score. An online marketplace can also help you recover your credit. Sign up now for a free consultation.
What is a secured credit card?
A secured credit card is a card that is backed by a deposit. You give the credit card issuer an initial deposit — which is often between $50 and $300 — and you’re given a line of credit equal to that amount. (For example, if you make a $150 deposit, your card will have a spending limit of $150).
You can then use the credit card for purchases as you would any other card and pay it off each month from your issuer. They then report those payments to the three major credit bureaus – Experian, Equifax, and TransUnion, which help you build credit and boost your credit score.
If you’re not sure about your current credit score, don’t worry: there are several ways to easily check your score (and overall credit status) through online tools.
Most secured credit card deposits are refundable, so you’ll get your money back when you close the account or have a strong history of on-time payments. Some secured cards also have a graduation component, which allows you to switch from a secured card to a traditional credit card after a certain period of time – usually several months (or longer).
Get a secured credit card
To get a secured credit card, you need to apply to the credit card company. Most major banks and card issuers offer secure cards. You can compare and contrast publishers and card offers through an online marketplace to get an idea of which one works best for you. If you are concerned about your current creditworthiness, consider seeking professional advice. There are companies that can help you restore your credit, improve your credit score and prepare you for a successful financial future.
Since secured cards are designed to help you build your credit, most card companies do not require a minimum credit score to qualify. However, approval is never guaranteed and you will be required to provide some personal information such as your Social Security number, address, and bank account information when applying. You must also be at least 18 years old.
How do I get the most out of my secured credit card?
To get the most out of your secured credit card, it’s critical that you pay your balance each month and on the agreed due date. Since your card issuer reports your payments to credit bureaus, failing to pay (or paying late) can tarnish your credit history and lower your credit score.
If you pay consistently on time, you can generally expect to achieve a solid credit score in about six months, according to Experian. Most secured cards include a credit score monitoring feature that allows you to track your score over time. If your card does not have this feature, you should be able to check the credit score through your bank, or you can purchase your score at any time from Equifax, TransUnion or Experian.