Which Credit Card Is Best for Buyin Without Risk of Someone Using the Same Card Again

What is a secured credit card?

A secured credit carte du jour is a carte du jour that requires a greenbacks security deposit when you open the account. The deposit reduces the adventure to the credit card issuer: If you lot don't pay your bill, the issuer can have the coin from your deposit. That's why these cards are available to people with bad credit or no credit.

The deposit is usually equal to your credit limit, and then if you deposit $200, you'll accept a $200 limit. Use the card responsibly, and you can ameliorate your credit plenty to authorize for an unsecured card — one that doesn't require a deposit.

Some of the best secured cards  allow you lot to upgrade your account directly to an unsecured bill of fare. Others don't have an upgrade process, and then y'all'll take to utilise elsewhere, then close the secured card. When you upgrade a secured menu or shut the account in practiced standing (meaning you're paid upward), the issuer gives you dorsum your deposit.

The minimum and maximum corporeality you can deposit varies by bill of fare, but you should exist prepared to come upward with at least $200 for a secured bill of fare eolith.

Check the list

The best credit cards for cash back, travel rewards, and more. Thoroughly researched by our Nerds.

Secured credit cards vs. unsecured credit cards

Whether you need a secured card comes downwards to how good your credit is.

For unsecured cards, which don't require a eolith and therefore pose more adventure to the issuer, credit-carte du jour companies typically require at least boilerplate credit, and practiced or excellent credit for the best ones.

Some unsecured credit cards advertise themselves every bit piece of cake to authorize for even if you lot have bad credit. But these cards ordinarily accuse extremely high fees. NerdWallet recommends applying for a secured card rather than a loftier-fee unsecured bill of fare.

How secured credit cards work

Once the initial deposit is paid, secured cards piece of work just similar unsecured ones:

• • You tin use them wherever credit cards are accustomed, including online.

  • Your bill comes monthly, and you pay for the purchases yous've fabricated. (Your eolith is non used to pay for purchases. See the divergence betwixt secured and prepaid cards, below.)

  • Yous incur interest if yous carry a remainder.

Near major credit card issuers offer both secured and unsecured cards. Almanac fees are common, simply you shouldn't pay more than than $fifty. You tin find multiple options with no annual fee at all among our favorite secured cards .

If y'all can't qualify for an unsecured carte, a secured card can be a nifty tool as you await to improve your credit. Just it's as important to exist responsible with a secured card as information technology is with any other loan or bill that shows upwardly on your credit report.

Secured credit cards: Examples

While secured credit cards all piece of work the same fashion — pay a eolith, utilize the card, build credit, get your deposit back and move to an unsecured card — they come with different features. For example:

• Flexible deposits and credit lines: The Majuscule One Platinum Secured Credit Carte du jour  typically requires a $200 minimum deposit, but some applicants may be able to become a $200 credit line with a $49 or $99 deposit. You can deposit upward to $i,000 to get a higher credit line. Unlike with most secured cards, y'all tin pay your deposit in installments. And if you make on-fourth dimension payments, you may exist considered for a college credit line without depositing more money. Almanac fee: $0 .

• Rewards:  The Capital 1 Quicksilver Secured Cash Rewards Credit Carte  earns 1.5% cash back on all purchases — the same rewards offered by the regular Quicksilver carte du jour for people with good to excellent credit. Almanac fee: $0 . Minimum eolith: $200; maximum: $i,000 to $3,000.

• Automatic business relationship reviews:  With the Discover it® Secured Credit Card , your account volition be automatically reviewed for an upgrade to an unsecured carte afterward seven months. This card also has rewards — two% cash dorsum at gas stations and restaurants on up to $1,000 in combined purchases each quarter; all other purchases earn ane%. Annual fee: $0 . Minimum deposit: $200; maximum: $2,500.

• No credit check: The OpenSky® Secured Visa® Credit Card  doesn't offer rewards, and the issuer doesn't have unsecured cards to upgrade to (meaning that once you qualify for a regular card, you'll have to close this account to get your eolith back). But at that place's no credit check required to become this card, so even people with desperately damaged credit might qualify, even if they've been rejected for other secured cards. This comes at a cost, though: an annual fee of $35 . Minimum eolith: $200; maximum: $3,000.

Secured credit cards vs. prepaid debit cards

Prepaid debit cards seem similar to secured credit cards. Yous accept to pay money earlier y'all can use the card, and they typically have a Visa, MasterCard or American Express logo.

Only with prepaid debit cards, you're using your own money to make purchases — not coin borrowed from the issuer. You lot load money onto the card, and then the issuer uses that coin to pay for your purchases.

Since these cards don't extend any credit, business relationship activity isn't reported to the credit bureaus. Therefore, yous're not building a credit history by using a prepaid card. Prepaid debit cards can likewise have fees that secured credit cards practise not.

If building credit is your goal, a secured credit carte is actually your best bet.

How to employ a secured credit card to build credit

Although they crave a deposit, secured credit cards are a powerful tool for rebuilding credit . Here's how to utilize one most finer:

1. Use the carte du jour sparingly, making only one or 2 small purchases every month. Try not to permit your remainder ever exceed 30% of your credit limit. Keeping it under x% is even better.

2. Pay your balance in full every calendar month before the due date. When you pay in total, y'all won't exist charged interest. Interest rates on secured cards are mostly higher than those on unsecured cards.

3. Keep an eye on your credit score over time; when it has meaningfully improved, ask your issuer almost upgrading to an unsecured card.

How fast does a secured carte du jour build credit?

Many people find that past using a secured menu advisedly, information technology takes six months to a year to better their credit score enough that they're able to qualify for an unsecured card. Some issuers volition let you lot transfer your secured line of credit to an unsecured i , which is better for your credit score because it doesn't crave you to open a new business relationship.

But even if you practise have to apply for a new unsecured credit card, yous may be able to enjoy some of the benefits of having skilful credit — lower interest, rewards and more than competitive fees.

When that mean solar day comes, your fourth dimension rebuilding your credit with a secured credit card volition have been worth it.

Frequently asked questions

What is a secured credit card?

A secured credit carte du jour is a credit bill of fare that requires y'all to provide a cash security eolith to open an account. The eolith protects the issuer from losing coin if you don't pay your bill, and then secured credit cards are easier to get for people with bad credit or no credit history.

How do secured credit cards work?

When you open a secured credit card account, you provide a cash security eolith. Minimum deposit requirements are usually $200 to $300. Your eolith is ordinarily equal to your credit limit — so if you put down a $500 deposit, you lot'll have a credit line of $500.

Once the business relationship is open, you use a secured card like any other credit card: You brand purchases with information technology, and then y'all pay off those purchases. Note that the coin from your security eolith is not "loaded" onto the carte du jour, and it is not used to pay for your purchases. Your deposit comes into play only if you lot neglect to pay your bill. If that happens, the card visitor will use your deposit to cover the amount you owe — and if it has to do that, information technology will probably shut your account.

Using a secured credit card responsibly tin help yous build credit to the indicate where you qualify for a regular "unsecured" card. You may be able to upgrade your secured card to an unsecured pick from the same issuer, or you tin apply with a different issuer. If yous upgrade or shut your secured card business relationship in good standing, you get your eolith dorsum.

Do secured credit cards build credit?

A secured credit bill of fare is ane of the easiest and quickest means to build credit, provided you use it responsibly:

• Use the card regularly, but don't max it out.

• Keep your residue below 30% of your credit limit. Staying beneath x% is even better.

• Pay your bill by the due engagement every month. To avoid being charged interest, pay the full balance shown on your statement.

Some secured card holders are able to boost their credit enough to authorize for a regular card in less than a year.

Do I get my deposit back with a secured credit card?

If you close your secured card business relationship in good continuing — meaning you have paid in full — you'll get your eolith back. If y'all upgrade your account to an unsecured card from the aforementioned issuer, yous should besides get your deposit back.

Is a secured credit carte a prepaid card?

• With a secured credit card, the money you put down is a security deposit, which the card company holds in case you don't pay your bill. The money is not used to pay for purchases. If you lot provide a $200 deposit and and so use the card to buy something for $50, you'll accept to pay $fifty when your pecker comes.

• With a prepaid card, the money you provide is loaded onto the card and is used to pay for purchases. If you lot load $200 on the card and and then use the card to buy something for $50, the corporeality on the card drops to $150.

What is a secured credit carte du jour?

A secured credit card is a credit carte du jour that requires you to provide a cash security deposit to open up an account. The deposit protects the issuer from losing coin if you lot don't pay your beak, so secured credit cards are easier to get for people with bad credit or no credit history.

How do secured credit cards work?

When you open a secured credit carte account, y'all provide a greenbacks security deposit.

Minimum deposit requirements

are usually $200 to $300. Your eolith is usually equal to your credit limit — and then if yous put down a $500 deposit, you lot'll have a credit line of $500.

Once the business relationship is open, you utilise a secured card like any other credit bill of fare: You make purchases with it, and and then yous pay off those purchases. Notation that the coin from your security eolith is non "loaded" onto the menu, and it is not used to pay for your purchases. Your deposit comes into play merely if you fail to pay your nib. If that happens, the menu company volition use your deposit to cover the amount you owe — and if information technology has to exercise that, it will probably close your account.

Using a secured credit card responsibly can assist y'all build credit to the point where you qualify for a regular "unsecured" bill of fare. Y'all may be able to upgrade your secured carte du jour to an unsecured pick from the same issuer, or you lot can apply with a dissimilar issuer. If you upgrade or close your secured card account in expert continuing, you go your deposit back.

Do secured credit cards build credit?

A secured credit carte is ane of the easiest and quickest means to build credit, provided you use it responsibly:

• Use the card regularly, but don't max it out.

• Keep your balance below 30% of your credit limit. Staying below 10% is fifty-fifty improve.

• Pay your nib by the due appointment every month. To avoid being charged involvement, pay the full balance shown on your statement.

Some secured carte du jour holders are able to boost their credit enough to

authorize for a regular card

in less than a year.

Do I get my deposit back with a secured credit card?

If you lot shut your secured carte du jour business relationship in adept continuing — meaning you take paid in full — you'll get your eolith back. If yous upgrade your account to an unsecured carte du jour from the same issuer, you should also get your deposit back.

Is a secured credit bill of fare a prepaid card?

Secured credit cards and prepaid cards both require you to provide some money before you can use the menu, but

secured and prepaid cards are fundamentally different

in how that money is used:

• With a secured credit card, the money you put downward is a security eolith, which the card company holds in example yous don't pay your bill. The coin is not used to pay for purchases. If you provide a $200 deposit and then use the card to buy something for $50, you'll have to pay $fifty when your bill comes.

• With a prepaid carte, the coin y'all provide is loaded onto the card and is used to pay for purchases. If you load $200 on the menu and and so apply the card to buy something for $50, the amount on the carte du jour drops to $150.

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Source: https://www.nerdwallet.com/article/credit-cards/secured-credit-cards-vs-unsecured-difference

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