A secured credit card is a type of card targeted mainly to high risk individuals with bad credit. The purpose of a secured credit card is to allow the individual access to a credit card while helping them rebuild their credit.
Secured credit cards are “secured” by a bank deposit account that is owned by the cardholder. When you open a secured card you will be required to open one of these deposit accounts to provide collateral. Your credit limit will usually be equal to the amount you deposit, although it may be higher or lower, depending on your risk.
The Public Savings Bank Secured Black Card is one of the best secured credit cards because it has no annual fee, after the one time $79.00 application fee, reports to all 3 credit bureaus, and is FDIC insured.
- 0% APR on purchases for 6 months
- No annual or monthly fees
- Reports to all 3 credit bureaus
- No minimum credit score
- Lifetime credit limits up to $5,000
The Next Millennium Visa is a secured credit card with a limit of up to $5000. This card is good for those who have limited to no credit, no credit check is required and the application process is extremely straightforward. When approved you can use your card anywhere that Visa is excepted.
- No credit check
- Approved regardless of credit history
- Secured credit limit of up to $5000.00
- Get cash at over 740,000 ATMs
- Accepted wherever Visa® is accepted
In the case that you fail to make your payments and default on your account the issuer of the card will be entitled to recover the money from the deposit account. Generally, individual missed payments are not taken from the deposit account. That course of action is usually reserved for severe delinquencies or if the credit account is closed. This can be problematic to the cardholder if they have trouble making payments because the account will continue to add up interest and late fees before the deposit money is used. It’s even possible that the amount owed to the card issuer will exceed the amount in the deposit account, causing even more debt.
Secured credit cards are often the only option for people with very bad or no credit history. The problem is very high fees and costs are associated with them. For example, you’re often required to pay a high annual fee, along with a sign up fee or program fee. Sometimes you’ll end up paying up to $250 montly just to use the card.
If you’re looking for a good secured credit card make sure you read all the terms. Look for any fees associated with the card, including sign up fees, usage fees, and annual fees. Check the APR and make sure it’s not unreasonable. Usually with a secured credit card you can get an APR of 9.99% or less. It’s also important to understand how much money you’ll need to initially deposit, and what percentage of your credit limit this will be (from 10% to 100%).
Secured credit cards, however, will help you rebuild your credit in the long run, possibly making the fees worth it to you. They commonly report often to all credit bureaus, so if you make on-time payments you’ll see an improvement in your credit over time. Secured cards also give you the convienence of being able to make credit card purchases at stores and online. Consider carefully whether a secured credit card makes sense for you and whether or not the fees are affordable.