We have two types of credit cards which include secured and unsecured ones. For today, we shall mainly look at secured ones. Credit cards are essential payment tools that allow you to borrow from your issuer in a revolving manner. That means you can borrow again and again once you settle your dues. Secured ones are mainly for building credit. I will show you the best secured credit card for rebuilding credit later on.
In most cases, credit cards require you to have a borrowing history when applying for them. However, anybody can apply for secured ones as long as they are over 18 years old. All you need to have is a deposit amount as per the terms and conditions of the issuer. The deposit amount differs from one issuer to the other. It all depends on your preferences when choosing the best card to use.
For your information, the deposit amount you produce when applying for a secured credit card is for security reasons. If you cannot pay your debt, your card issuer takes the deposit to repay your loan. Therefore, you borrow against the amount, and in most cases, you have to get a lower limit than the deposit. You cannot use the deposit until you qualify for an unsecured credit card and have it unlocked for use.
How to apply for a secured credit card?
A Secured credit card is a sure bet to get approved for a credit card with no credit as long as you have the required deposit amount. There are a lot of financial companies that are offering secured credit cards. You can either get a card online or at a physical branch. When applying at a branch, you must first deposit the amount you intend to borrow against, and then get the limit. The amount you keep as security dictates your credit limit.
Most issuers allow you to deposit any amount above the minimum. That way, they can allow people of different financial capabilities to get credit cards. So you apply for the card by filling in the necessary details, depositing the needed money, and getting your card. You cannot get a card unless you pay the deposit.
When you apply online, you have to use the available means to pay for the card. Most online issuers allow you to pay for your credit card deposit by using a bank account. You can also use a debit card, credit card, or even other platforms such as PayPal and Payoneer. Whichever method you use, the money has to reach the issuer into your account.
After making the payments, the card issuer then sends the card to your physical address. Others will give you a virtual card whereby you get the card number, the expiration date, and the security code to make online payments as you wait for the tangible card, which can even take more than a week to arrive.
What are the factors to consider when applying for a secured credit card?
You cannot just apply for a credit card without studying it in and out. There are things that you must check before applying for any card. They include the following.
i) Minimum deposit
Some will set a higher minimum deposit amount, while others will set a lower one. You should check a card with the amount you can afford. After all, you aim to build credit, and thus there is no essence of a large limit.
ii) Interest rate
Go for the one with a lower Annual Percentage Rate (APR). That way, you will pay a small amount of money as interest. Secured credit card issuers charge a small interest rate, but you will find some charging lower than others.
Issuers make money when they charge interest and other fees. You should check on fees such as foreign transaction fees, withdrawal fees, cash advance fees, annual fees, monthly maintenance fees, and so on. The lesser the fees, the better the card.
iv) Virtual or tangible
Some issuers offer exclusively online payment cards while others offer tangible plastic cards. Since you understand why you need the card, you should decide on the best card to use.
How are secured credit cards different from unsecured ones?
One of the differences between secured and unsecured credit cards is that secured credit cards do not require credit scores but a particular deposit amount, while unsecured ones require scores. These are numerical and express an individual’s creditworthiness. The credit bureaus calculate them as per the information received from financial companies.
Another difference is that you determine the limit of a secured credit card depending on your deposit. Unsecured credit card issuers determine your limit by looking at your scores.
Moreover, secured credit cards issuers do not make hard inquiries as it is with unsecured credit cards. Hard inquiries help determine the applicants’ scores before deciding on the credit limit to give them.
How long do secured credit cards take to rebuild credit scores?
I am sure you must be longing to know the duration you can take to build your credit scores either from scratch or from a bad credit situation. The time taken varies from one issuer to the other. But now the question remains, how long does it take to build credit with a secured credit card? It can take you many months or years to rebuild credit in most cases.
However, you can build your credit in less than a month so long as you check on some factors such as becoming an authorized user, clearing all the debts, and so on. Again, if you are building your credit from scratch, you may build your scores fast. Above all, being disciplined is the key.
Who has the best secured credit card for rebuilding credit?
There are hundreds of secured credit card issuers. My research has led me to a few of them, including the following.
Discover issues reward credit cards, home equity loans, online banking, student loans, and personal loans. The company’s Discover it® Secured Credit Card is one of the best cards that you can use for your score rebuilding quest. It charges 22.99% Variable APR and charges no annual fees. Interestingly, the card can earn you a 2% cashback at gas stations and restaurants when you use up to $1,000 in combined purchases every quarter.
2) Navy Federal Credit Union
Navy Federal Credit Union is one of the best credit unions in the U.S. that offers various financial services to its clients. It serves the Navy, Army, Air Force, Space Force, Marine Corps, Coast Guard, veterans, DoD & their immediate family members. The union issues Navy FCU nRewards® Secured Credit Card, which is an excellent way to rebuild credit from scratch or a bad credit point.
3) U.S. Bank
You cannot mention the best banks in the United States without mentioning the U.S. Bank. It has various services, and one of them is the U.S. Bank Cash+® Visa® Secured Card. You can have the credit card and pay a 25.99% variable APR, plus zero annual fees. The card earns you a 5% cashback on your first $2,000 in combined eligible purchases every quarter in two categories of choice. All credit scores are acceptable.
4) Bank of America
The Bank of America is among the largest banks in the U.S. It serves millions of Americans as we speak and offers services such as personal banking, personal loans, credit cards, savings, checking, and so on. It has the Bank of America Unlimited Cash Rewards Secured Credit Card that allows you to rebuild your credit scores. It charges no annual fees, and you pay an APR of 23.99%, which is variable. The card earns you unlimited 1.5% cashback on all purchases.
5) Capital One
Capital One gives you some of the best credit cards, checking accounts, savings accounts, loans, and other banking services. Among them that you can get, Capital One Quicksilver Secured Cash Rewards Credit Card is good to help you build credit. It charges 26.99% APR (Variable). Also, you will be lucky to pay no annual fees whatsoever.
Mastercard has been issuing payment cards for some time now. If you want to build credit, then the First Progress Platinum Select Mastercard® Secured Credit Card is among the best cards you can use today. The card has no welcome bonus, and unfortunately, it charges an annual fee of $39. It is suitable for bad credit, and its Annual Percentage Rate is 13.99% (Variable). It is suitable for all kinds of credit scores.
A secured credit card is a payment card that allows you to deposit money to get it. The deposit is mainly for security purposes. Again, the cards are mainly for rebuilding credit from scratch or a point of bad credit scores. The cards are different from the unsecured in that they do not require credit scores. The more your deposit, the higher your credit limits and vice versa.