A secured credit card is а wonderful option for people who have а low credit score and need a credit card.  These cards are secured by a security deposit that you submit to the issuing bank.   Its the same concept of providing a security deposit when you rent an apartment, they will hold the funds to make sure no damage is done to the apartment.  In the case of a secured credit card they hold the money and make it your credit limit.  You can only charge up to the amount you deposited. 

Why are secured credit cards so popular?

Secured credit cards are popular with both consumers and credit repair companies because of the many benefits they give to the user.

1. They will generally approve anyone.  That’s is why they are also called guaranteed approval credit cards
2. The interest rates charged tend to be lower than the interest rates of most bad credit credit cards.
3. Since the issuing bank has your security deposit, their investment in you is 100% secured.  So you can qualify for much higher credit limits (as long as you have the matching security deposit)  This is a great way to build comparable credit.  What is comparable credit?  A big problem with most bad credit credit cards is the low credit limit they give.  If you are trying to build or re-build credit.  You need to show that someone has trusted you with a large line of credit.  So when you apply for a $10,000 loan, the bank sees that your highest line of credit is a $500 unsecured credit card.  You won’t qualify for $10,000.  They may give you $5,000 if you are lucky.  But if you have a secured credit card of $5,000 you are more likely to be approved for $10,000.  The bank can see that you have handled a larger line of credit before.
4. After you have shown your ability to make your monthly payments, generally within 2 years your secured credit will become unsecured and the bank will refund you the money you put down as your security deposit.

Select the best secured credit for you

Although any secured credit card is a good start for rebuilding or building credit.  There are differences so you need to read the fine print.

• Most secured cards are guaranteed approval, but not all!  The ones on this site will approve anyone so they are a good place to start looking for your card.
• Interest rates: the interest charged will vary from card issuer to card issuer
• Maximum amount you can deposit for your credit limit
• Some card will let you add more money to your account to increase your credit limit
• Do the report to all 3 credit bureaus or just 1?

When I’m working with a credit repair client, I always suggest that they get a secured credit card as we work on removing the negative items on their credit report.  Its important to build good tradelines along with removing the negative ones.  And as far as we are concerned, a secured credit card is a win-win for our clients.  Not only does it encourage them to create new payment habits, but they are also building up a great savings account.

For a list of the secured credit cards we recommend, please click here.

updated 5/5/2016