Secured credit cards for bad credit
Poor, poor, or nonexistent credit or credit history should not stop you from getting a credit card. In fact, there are great credit cards, secured credit cards for bad credit rating. To build or improve your credit score, we have a FREE Step-by-step guide to improving your credit score to help you.
Debt Free Guys has partnered with CardRatings to cover our credit card products. Debt Free Guys and CardRatings may receive commission from card issuers. Opinions, reviews, analyzes and recommendations are those of the author alone and have not been reviewed, endorsed or approved by any of these companies.
What is the best secured credit card for bad credit?
Whether you’re new to credit or have made a few mistakes and need to rebuild your credit, a secured credit card is a great way to get on the path to a better credit score, credit history, and relationship with a financial institution. Additionally, many secured credit cards are great, low-cost alternatives to high APR credit cards that can keep you financially stuck.
What is a secured credit card?
A secured credit card allows the secured cardholder to make purchases on credit, just like any other credit card. A secured credit card has an available credit limit or maximum amount to which the issuer of the secured credit card allows the secured card holder or borrower access for purchases.
Typically, with a secured credit card, these amounts are lower when the card is first opened and then increase over time as the secured credit card holder demonstrates that they can use their credit wisely and pay off any remaining balances over time.
The security of a secured credit card makes the cards unique.
When the secured credit card applicant applies for the secured credit card, the card issuer typically requires a deposit. In some cases, the deposit is as low as $49 and can be as high as $5,000, depending on the amount the secured credit card applicant wants to access.
Typically, the higher the down payment or secured amount, the higher the credit limit or amount the borrower can access.
What is the difference between low credit and bad credit?
Secured credit cards are great tools for those with low or bad credit to use to help build or repair their credit.
If someone has thin credit, they have never had access to credit, which is often the case with younger people or those who rely solely on cash. This is the case for LGBTQ people who work in the service and hospitality industries and receive a large portion of their take-home pay as tips. Additionally, a recent survey found that 50% of LGBTQ people do not have a checking or savings account and, for this reason, a secured credit card may be the best first choice for accessing credit.
Bad credit, on the other hand, is the result of errors in your existing credit history. Some of the most common bad credit mistakes include missing payments, using too much credit, applying for credit too often, or applying for credit frequently over a short period of time.
Should I get pre-approval?
It may sound strange to get pre-approved for a secured credit card, but it’s a smart move for someone building or repairing bad credit.
So what does the pre-approval process look like for a secured credit card?
It’s actually the same as applying for another line of credit. First, make sure the secured credit card issuer has a pre-approval process. The best way to do this is to go to the website of the secured credit card issuer you are applying with and check to see if they have a pre-approval process.
A pre-approval process allows you to see if you qualify for a secured credit card without negatively impacting your credit score.
Three secured credit cards for bad credit
Below are three secured credit cards that we think are best for you to apply for to build or repair your credit.
1. First Progress Platinum Elite Mastercard® Secured Credit Card
We like this card because of its low annual fee of $49. When building or repairing bad credit, you want to avoid as many fees as possible.
With the First Progress Platinum Elite Mastercard® Secured Credit Card, you deposit between $200 and $2,000 and receive the same amount as a line of credit. The lower amount of $200 makes it accessible to more people. There is no credit deduction when you apply, so applying will not impact your credit score. A big bonus if you’re trying to rebuild your credit.
If you need to access your original deposit, simply pay off the card in full and request the deposit.
Find out more about the benefits of this card.
2. OpenSky® Secured Visa® Credit Card
Although this card has an annual fee, the fee is very low at just $35 per year. Additionally, similar to the Capital One Secured Mastercard, the OpenSky® Secured Visa® Credit Card allows for a relatively low deposit of $200 and balances it as your credit limit.
The best thing about the OpenSky® Secured Visa® Credit Card is the “No Credit Check” feature. If you have the worst credit score or no credit at all, you will still qualify once you make the $200 deposit.
When you finally make payments, those payments will appear on your credit file and you will see them reflected in your credit score.
Check out the additional benefits this card offers.
3. Green Dot primor® Visa® Gold Secured credit card
Like the two cards mentioned above, the Green Dot primor® Visa® Gold Secured credit card is also ideal for poor credit. There is also a very low annual fee of $49 per year.
Similar to the OpenSky® Secured Visa® Credit Card, there is a “No Credit Check” feature, which is perfect if you have no credit score or a credit score below 550. However, unlike the two above, this card allows much larger credit lines that must be doubled with an equal deposit of up to $5,000.
The best thing about this card is the low interest rate offer, which is perfect if you’re struggling to pay off your balance each month.
Discover low interest rates with this card.
Secured credit card application process
You may be asking yourself, “Why do I need to apply for a secured credit card?”
The application process is a mix of opening and funding a bank account and opening a credit card. You must provide information in advance in the application process and then send money to the secured credit card company as security to protect it from the risk of you defaulting on your payments.
Please note that these funds will not be used if you do not make a payment. You must continue to pay your full balance or minimum payment each month.
Everyone. Singles. Month.
What are the steps to open a secured credit card?
- Search the list above for a secured credit card you want to apply for
- Make sure you can meet the financing needs
- Apply for the selected card from the list above
- Wait for your approval
- Once approved, you can use your bank account to deposit the requested amount into your account
- You will receive your card within a few weeks
- Make your payments on time once you start using the card
What alternatives are there to secured credit cards?
For secured credit card alternatives, you have three options; Debit cards, prepaid cards and unsecured credit cards. There are other ways to get money, such as loans, but if you use a card in different situations, such as traveling and shopping, the following cards will work.
1. Debit cards
You may be wondering why a debit card would be an alternative. This is because some debit cards have a credit option. This means that when you spend more money than you have in your account, you are essentially using it as a credit card and borrowing money from your bank.
Please note that there are fees for using this feature. Please confirm what these fees are before using this feature.
Please note that not all locations, such as car rental companies, accept debit cards as a valid form of payment. Since such places require a deposit, your debit card may not have enough funds.
2. Prepaid cards
Although prepaid cards are not a real way to borrow money, they do provide a reasonably safe way to use the money that is available to you in the form of a card. Most prepaid cards require an activation fee and possibly a monthly service fee. Therefore, this may not be the optimal choice if you need access to smaller amounts of cash.
3. Unsecured credit cards
Unsecured credit cards are the traditional credit cards we are most familiar with. The reason we list these as alternatives is because if you don’t qualify for a secured credit card, you may qualify for an unsecured credit card. However, since these are reserved for people with poor or very poor credit, the fees can be hidden or very high.
Be careful and understand when applying for these types of cards all the fees.