When your credit score isn’t high enough to qualify for an unsecured credit card that doesn’t require a security deposit, your next best option is a secured credit card that can also help build your credit. These are some of the best secured credit cards that are some of the most affordable & report your payment history to the credit bureaus allowing you to build your credit and save money in credit card fees simultaneously.
Discover it Secured Credit Card
Annual Fee: $0
Unique Perk: Zero annual fee & Purchase Rewards
The Discover it Secured Credit Card is probably the best secured credit card overall. It has no annual fee and offers purchase rewards. While other secured credit cards charge no annual fee, purchase rewards are typically reserved for unsecured credit cards.
The minimum deposit is $200, but, your credit limit can be as high as $2,500 if you can afford the security deposit of the same dollar amount.
With the Discover it Secured, you earn 2% cash back on the first $1,000 in gas & restaurant purchases each quarter and 1% on everything else. Honestly, this reward rate is even better than some unsecured credit cards.
Additional card benefits include complimentary access to your FICO credit score and Discover will even match your cash back rewards for the first year as an added bonus.
Capital One Secured MasterCard
Annual Fee: $0
Unique Perk: Zero annual fee & Flexible Down Payment
The Capital One Secured MasterCard is another great option as it has no annual fee and you might be able to pay a reduced security deposit of $49 or $99 instead of the normal $200 required deposit.
The initial opening credit line is $200. After 5 months of on-time payments, Capital One will review your profile and potentially increase your credit line without requiring a larger security deposit.
Due to stricter than normal underwriting standards, the Capital One Secured MasterCard is probably a more realistic opportunity for applicants with minimal credit history and a low debt-to-income ratio. Also, you will need a checking or savings account to be approved as well.
USAA Secured Card
Annual Fee: $35
Unique Perk: Security Deposit earns interest
With USAA, your secured credit card can be issued by American Express or Visa. Both have the same annual fee of $35 and your security deposit is placed in a 2-year interest-bearing CD with a current variable rate of 0.54%.
Your credit limit can range from $250 to $5,000 and is the same amount as your refundable security deposit.
As USAA is a semi-exclusive group comprised of military members and their families, these cards also offer additional benefits for active military members including a reduced APR of 4% when you deploy or relocate to a new duty station.
Open Sky Secured Visa
Annual Fee: $35
Unique Perk: No credit check
If you are worried your credit score might not be high enough to qualify for another secured credit card or you simply don’t want another inquiry on your credit history, the Open Sky Secured Visa is the best option.
They will not perform a credit check, but, they will report your payment history to the credit bureaus allowing you to build your score. The annual fee is $35 which is very reasonable.
Also, credit lines can range from $200 to $3,000 with a matching security deposit.
Should You Apply for a Secured Credit Card?
Applying for a secured credit card might be a tough decision to make. Especially if unsecured credit cards damaged your credit scores in the first place.
Secured credit cards are an easy way to build your credit score without having to borrow money. You just need to make sure you pay your balance in full each month. If you can, apply for a card with no annual fee as that will save you the most money. And, you might be able to upgrade to an unsecured card in 12-18 months and recoup your security deposit!