some of the best secured credit cards

Credit can feel tricky at times. It takes credit to get credit, or so it seems when someone is new to credit or working to repair past credit issues. However, there are financial products designed to solve this problem, and using them correctly can lead to other credit opportunities. One such product is secured credit cards. Here’s what you need to know about them.

What Are Secured Credit Cards?

Credit products can come in one of two forms: secured and unsecured. Secured credit products, such as an auto loan, mortgage, or home equity line of credit, are tied to collateral that can be seized if the accounts go delinquent. That’s why getting behind on a mortgage, for example, can lead to the borrower losing their home.

Unsecured credit products, such as credit cards and student loans, don’t have any collateral tied to them. If they go delinquent, there’s no property for the lender to recoup — and thus it can sometimes be harder to be approved for these products.

FREE TOOL: Are mistakes on your credit report hurting your credit score? Find out here.

Secured credit cards were created to open the door to credit for consumers who aren’t able to be approved for standard, unsecured credit cards. The collateral put up for secured credit cards is a security deposit, typically somewhere between $49-$300.

Although some secured credit cards’ credit limits are the same as the amount of money put down, that money can’t be used by the consumer to pay the card. This is similar to the way apartments work — renters often have to put down a security deposit that doesn’t go toward their rent, and that they won’t get back until they move out.

Can Secured Credit Cards Help You Build Credit?

Secured credit cards typically have lower credit limits than unsecured credit cards, and they sometimes require an annual fee on top of the security deposit. When compared side-by-side, regular credit cards might seem to be a better product. But secured credit cards can be a great tool for consumers who aren’t able to be approved for a regular credit card.

The activity on secured cards is typically reported to the credit reporting agencies, so proper usage can lead to building good credit. All you have to do is pay the full amount due on time every month and keep your balances low (ideally no more than 30 percent of the credit limit).

Keep in mind that you don’t have to carry a balance on the card from month to month to build credit. This is a common credit myth, but the truth is that you could use your card and pay it in full every month and build credit that way. There’s no need to go into debt to build credit.

Some of the Best Secured Credit Cards¹

There are many secured credit cards to choose from — both to help you build personal credit and to help you build business credit. Below are some of the most popular choices for the moment, with all the details described being current as of June 2019.

Keep in mind as you review the APRs for each credit card that the interest rate you are ultimately given will be based on your creditworthiness. That’s why credit card issuers typically advertise cards with a range of potential APRs. Also, APRs can sometimes change when there’s a late payment — something called a “penalty APR,” which is in addition to any late fee that might be assessed. It’s important to note overall that rates are subject to change.

BankAmericard® Secured Credit Card

  • Annual Fee: None
  • Deposit: $300-$4,900
  • Credit Limit: Varies, based in part on the amount you deposit
  • Late Payment Fee: Up to $38
  • Other Features: Access to one of your FICO® credit scores (updated monthly), account alerts
  • Purchase APR: 22.49%
  • Rewards: None
  • Upgrade Options: Bank of America will periodically review your account to see if you can qualify to have your security deposit returned.

Credit Builder Secured Visa® Credit Card

  • Annual Fee: $25
  • Deposit: $300-$3,000
  • Credit Limit: You set your own limit, which is based on the amount of money you deposit into a Credit Builder Savings account. You can increase your credit limit by depositing more into the account, in increments of $50.
  • Late Payment Fee: Up to $15
  • Purchase APR: 23.24%
  • Rewards: None
  • Upgrade Options: Academy Bank, the issuer of this card, says you can “upgrade to an unsecured card with good performance.”

Discover it® Secured

  • Annual Fee: None
  • Deposit: Minimum of $200
  • Credit Limit: Maximum of $2,500
  • Late Payment Fee: No fee for the first late payment, but up to $37 for late payments after that
  • Other Features: One of your FICO® credit scores included on your monthly statements for free, free monitoring and alerts of your social security number.
  • Purchase APR: 25.24%
  • Rewards: You can earn 2% cash back for purchases made at gas stations and restaurants (up to $1,000 in purchases per quarter). You can also earn unlimited 1% cash back on the rest of your purchases, and they’ll match your earned cash back at the end of your first year with the card.
  • Upgrade Options: After eight months with the card, Discover will start reviewing your card activity every month to see if you can be eligible to have your security deposit returned.

Secured Mastercard® from Capital One®

  • Annual Fee: None
  • Deposit: $49, $99, $200
  • Credit Limit: Starts at $200, but you can deposit additional money before opening your account to obtain a higher line of credit (with a maximum of $1,000).
  • Late Payment Fee: Up to $38
  • Other Features: You can instantly lock your card via the Capital One Mobile app if you misplace your card — the app also enables you to have instant purchase notifications and account alerts. Access to Virtual Card Numbers from EnoSM so you can shop online without using the number on your card.
  • Purchase APR: 26.99%
  • Rewards: None
  • Upgrade Options: None mentioned

Wells Fargo Secured Credit Card

  • Annual Fee: $25 annual fee
  • Deposit: Minimum of $300
  • Credit Limit: Same as your deposit
  • Late Payment Fee: Up to $37
  • Other Features: Access to one of your FICO® credit scores, purchase and other account alerts, cell phone protection, travel and emergency assistance
  • Purchase APR: 21.24%
  • Rewards: None
  • Upgrade Options: This card is eligible for upgrades to an unsecured credit card upon periodic review by Wells Fargo
¹This list of cards is provided for informational purposes only. Upturn Credit does not endorse any particular card or have any relationship with the card issuers. You should review all product information carefully before applying for any card.

[Get all the facts about credit cards and find out how to make the most of them.]