The best secured credit cards can help you repair poor credit or establish a credit history if you have none. While secured credit cards are very different than regular credit cards, they can be a valuable tool in the hands of educated, responsible borrowers.
The Simple Dollar has combed through the secured credit cards on offer in 2017 to find you the best out there. Here are our recommendations in a variety of categories.
The Simple Dollar’s Top Picks
- Best Secured Credit Card Overall: Discover it® Secured Credit Card – No Annual Fee*
- Best Secured Credit Cards for Military Members and Their Families: USAA Secured Card® American Express® Card and USAA Secured Card® Platinum Visa®
- Best Secured Credit Card for Low Fees: Capital One Secured MasterCard
- Best Secured Credit Cards for Moving Up to an Unsecured Card (tie):BankAmericard Secured Visa and U.S. Bank Secured Visa
- Best Secured Credit Card for a Low APR: First Progress Platinum Prestige MasterCard Secured
Whether you’re just starting out or rebuilding your credit, we recommend getting a secured credit card as a first step to building good credit, because a secured card is often the easiest form of credit to get.
Unfortunately, most of these cards come with heavier fees and typically require you to pay a deposit upfront, which acts as collateral for your line of credit. If your intent is to build up your credit the right way, you’ll only have to put up with the fees until you can trade up to a better card with improved benefits like a cash-back credit card.
The best secured credit cards will report your account activity to all major credit bureaus, have reasonable fees and interest rates, and allow you to “graduate” to an unsecured card after a period of responsible usage. Some may even give you a credit limit higher than the deposit you put down to secure your card.
Keep reading to discover some of the basics about secured credit cards, their pros and cons, how to use them responsibly, and how to shop for the best secured card.
Best Secured Credit Cards
Every card on this list has perhaps the most crucial benefit of all when it comes to a secured credit card: All of them report to all three major credit bureaus. That means that if you use your card responsibly, you’ll be improving your credit score.
Best Secured Credit Card Overall:
Discover it® Secured Credit Card – No Annual Fee*
The Discover it® Secured Credit Card was a new arrival on the secured credit card market in 2016, and it is easily the best secured credit card on the market.
Due to the fact that this card has no annual fee, it is far and away the best option for individuals trying to rebuild their credit. As an added bonus, this card lets you earn rewards! Simply use your card for everyday spending and earn 2x points on your first $1,000 in gas station and dining spending each quarter, plus 1 point per dollar spent on all other purchases.
The Discover it® Secured Credit Card will report your credit history to all three credit reporting agencies, plus they won’t charge a late fee or raise your APR after your first late payment.
Who It’s Good For:
This card is good for anyone who needs a secured credit card to build their credit. Since it doesn’t charge an annual fee and lets you earn rewards, there is really no way to go wrong with this option.
Who Should Pass:
Anyone who can qualify for an unsecured credit card might be better off doing so in order to secure a better APR, or annual percentage rate, and more perks.
Best Secured Credit Cards for Military:
USAA Secured Credit Cards
It’s too bad (for most of us) that you have to be affiliated with the military to get one of USAA’s two secured credit cards, the USAA Secured Card® American Express® Card and the USAA Secured Card® Platinum Visa®, because they are among the best you’ll find anywhere.
Both cards have the same basic terms and perks. One of the best features is that your deposit goes into a certificate of deposit and earns interest for you, instead of simply sitting there. If you put more money in the CD, you can request a corresponding increase for your credit limit. You’ll also get six months of free credit monitoring from Experian.
- Annual fee: $35
- Required deposit: $250 to $5,000
- Purchase, cash advance, and balance transfer APR: 10.40% – 20.40%, variable
- Penalty APR: none
- Foreign transaction fee: 1%
- Grace period: At least 25 days
Who they’re good for: Anyone who qualifies — active military personnel or veterans, their spouses and children, and some other affiliates — should take a serious look, especially if you can nab the lower interest rate. No penalty APR is generous, and earning interest on your deposit is also a nice little perk.
Who should pass: If you aren’t a military member or affiliate, you aren’t eligible. Also, since your money goes into a two-year CD, you have to be willing to leave it alone for that time or you’ll pay an early-withdrawal penalty.
Best Secured Credit Card for Low Fees:
Capital One Secured MasterCard
The Capital One Secured MasterCard is one of the stronger secured credit cards out there, particularly if you’re concerned that you’ll be nickel-and-dimed by your card issuer. There is no annual fee or foreign transaction fees.
Your deposit can also net you a much higher credit limit than the money you actually part with: a $200 deposit may qualify you for up to a $3,000 credit line, and you can also put down as little as $49 or $99. You’ll also get access to Capital One’s Credit Tracker, a credit-monitoring tool that includes a credit simulator.
- Annual fee: none
- Required deposit: $49, $99, or $200
- Purchase, cash advance, and balance transfer APR: 24.9%
- Penalty APR: none
- Foreign transaction fee: none
- Grace period: At least 25 days
Who it’s good for: Anyone who doesn’t want to tie up a huge amount in a deposit to get a secured credit card should take a look. No foreign transaction fees also makes it an excellent pick for frequent travelers.
Who should pass: If you think you’ll carry a balance (not a good idea, especially for those rebuilding credit) the high APR on this card makes it one you should skip.
Best Secured Credit Card for Graduating to an Unsecured Card (tie):
BankAmericard Secured Visa and U.S. Bank Secured Visa
BankAmericard Secured Visa
If you use the BankAmericard Secured Visa responsibly for a year, you stand a good chance of getting your security deposit back and being upgraded to an unsecured card. And Bank of America may approve you for a higher credit limit than your deposit — up to $4,900 — based on your income and ability to pay.
- Annual fee: $39
- Required deposit: $300 minimum
- Purchase and balance transfer APR: 20.24%
- Cash advance APR: 24.99%
- Penalty APR: Up to 29.99%
- Foreign transaction fee: 3%
- Grace period: At least 25 days
Who it’s good for: The Bank Americard Secured Visa could be a strong option for anyone who wants a better-than-average shot at getting an unsecured card sooner rather than later. You won’t have to reapply for a new card — you can keep using the same one, a nice perk most card issuers don’t provide. You also may be able to qualify for a credit limit quite a bit higher than your deposit.
Who should pass: The fees are higher than those on some competing cards. The penalty APR of up to 29.99% and late payment fee of up to $38 could make this card especially painful for anyone who can’t faithfully pay their bill.
U.S. Bank Secured Visa
Like the Bank Americard, the U.S. Bank Secured Visa also gives you better than a fighting chance of trading up to an unsecured card after a year of responsible use.
Terms and fees are a bit more favorable with this one, including no penalty APR. But the trade-off is a more traditional deposit — you will only be approved for a credit line as large as the amount you can part with. However, that money will be put in a savings account that earns interest; your rate will be low, but it’s better than nothing.
- Annual fee: $29
- Required deposit: $300 to $5,000
- Purchase and balance transfer APR: 18.99%
- Cash advance APR: 23.99%
- Penalty APR: none
- Foreign transaction fee: 2-3%
- Grace period: 24-30 days
Who it’s good for: Again, this is a good pick for anyone who wants to graduate to a secured card. The APR is on the more reasonable side for secured cards, and the lack of a penalty APR also makes it a more attractive pick if you miss a payment.
Who should pass: Unlike the Bank Americard, you won’t have a shot at getting a credit line above what you deposit — so if you want a higher credit limit, you’ll definitely have to part with more cash.
Best Secured Credit Card for Low APR:
First Progress Platinum Prestige MasterCard Secured
There are secured credit cards out there with lower purchase APRs than the First Progress Platinum Prestige MasterCard MasterCard’s 11.99%, but most require a certain military or credit union affiliation. Anyone can apply for this First Progress card, which has an APR that is fairly low not just for secured credit cards, but for credit cards in general.
- Annual fee: $44
- Required deposit: $300 to $2,000
- Purchase APR: 11.99%
- Cash advance APR: 18.99%
- Penalty APR: none
- Foreign transaction fee: 3%
- Grace period: At least 25 days
Who it’s good for: You really should avoid carrying a credit-card balance, but if you’re going to ignore that advice, the low purchase APR makes this card a great choice. Your credit limit may also eventually be stretched to $5,000, which is fairly high for a secured credit card and gives you more purchasing power.
Who should pass: If you’re disciplined about paying off your balance each month, the lower APR won’t make much difference. However, you’ll still have to pay the $44 annual fee, which is on the high side.
What Is a Secured Credit Card?
A secured credit card requires you to deposit a certain amount of money in an account before you can use the card. Though it varies by company and by credit card, you may have to deposit an amount equal to your credit line. This money is used as collateral to protect the credit-card company in case you don’t pay your bills.
Because there’s very little risk to the credit-card company, people with poor credit stand a much better chance of being approved for secured credit cards. Every card issuer will have different criteria, but applicants approved for several popular secured cards had average credit scores in the mid-500s, according to Credit Karma. Some successful applicants even had scores in the 400s.
What are the pros of secured credit cards?
Though they’re known as a “last resort” of sorts, secured credit cards have a number of advantages. These include:
- Easier approval: If you’ve tried and failed to obtain an unsecured (or traditional) credit card, you know how frustrating that process can be. You’re much more likely to be approved for a secured credit card if you have bad credit or no credit.
- A way to build or rebuild your credit: Your card issuer will probably report your account activity to the credit bureaus. Assuming you use the card responsibly, this will help you start to boost your credit score, which can affect everything from how cheaply you can borrow money to where you live and work.
- A path to an unsecured credit card: Some credit-card companies will let you “graduate” to an unsecured card after you’ve used a secured credit card responsibly. You may not even need to reapply.
- Built-in discipline: If you’ve had problems with overspending in the past, a secured credit card’s low limit will limit the damage you can do to your finances.
What are the cons of secured credit cards?
Of course, secured cards aren’t on the top of most credit-card wish lists because of their unique requirements and limitations, which include:
- High interest rates and fees: In many cases, you will be paying a much higher APR than holders of unsecured cards — over 20% is not uncommon. Some secured cards also have higher-than-usual fees, which may include an annual fee as long as you have the card.
- You have to come up with a deposit: If you’re strapped for cash, it may be tough to set aside a few hundred dollars for your secured credit card. You also risk losing the deposit if you fall behind on payments.
- Low credit limit: Even if your credit-card issuer extends your credit limit beyond your deposit, it may be much lower than what you would get with an unsecured card and a better credit score. Though this can protect you from overspending, it also limits your spending power in case of emergency expenses.
How does a secured credit card stack up against a prepaid debit card or a personal loan?
You may be wondering why you would choose a secured credit card when a prepaid debit card would also give you the convenience of plastic without the hassle of applying for a credit card. After all, you still have to set aside your own money for the secured card’s deposit, so why bother?
First, remember that you can actually raise your credit score with a secured credit card because the card issuer will report to credit bureaus. That’s a huge benefit if you’re committed to using your card responsibly, and one you won’t get by simply using a prepaid debit card. You may also boost your chances of getting an unsecured card with the same issuer.
Second, there are fringe benefits to credit cards, even secured cards. Many cards have built-in perks such as purchase protection, which means your card issuer will reimburse you for certain items if they’re damaged or stolen within a certain period after purchase. Some may also extend manufacturers’ warranties. Your card may also insure you for certain travel expenses such as an interrupted trip or lost bag. These are advantages a prepaid debit card won’t give you.
Finally, it may be easier to understand the fees associated with a secured credit card because they’re required by law to be disclosed in a certain way. You may not realize the full range of fees associated with a prepaid debit card because each company can present the information in different ways.
Another way you can get funds with bad credit is by applying for a bad-credit personal loan. With bad credit, you’re typically going to be securing this loan with collateral that the bank can seize, such as your car, home, or other high-value possessions. You may be able to get a much larger loan than your credit limit on a secured card, and you won’t have to part with a big chunk of money as a deposit.
However, your APR will probably be at least as high, if not higher, than what you can get on a secured credit card. If you miss payments, you also may risk losing collateral much more valuable than a few hundred bucks.
If you do decide to look into a personal loan instead of a secured credit card, be sure to steer clear of predatory lenders. These include payday lenders, auto-title lenders, or any lenders who use high-pressure tactics to close a deal or guarantee that you can get a loan without checking your credit.
How to Use a Secured Credit Card Responsibly
Credit-card companies risk little by issuing secured credit cards, but you risk making bad credit even worse if you don’t use the card responsibly. Here’s how to do that:
- Avoid carrying a balance. This is particularly important with secured credit cards. That’s because your APR is likely to be fairly high. If you absolutely can’t afford to pay your whole balance, at least pay more than the minimum payment due to save on interest and show credit bureaus you’re serious about debt.
- Don’t miss any payments. This is critical when you want to build your credit score, because your payment history — that is, whether you’ve paid your bills on time — determines 35% of your credit score. Missing payments can also mean you’ll have to pay a late fee on top of the payment you already owe, and your card issuer may hit you with a higher penalty interest rate, too.
- Use your card every month. It may seem obvious, but to demonstrate responsible credit usage, you’ll actually have to use your credit card frequently. One easy way to do this is to pay a couple of consistent monthly bills with your credit card.
How to Shop for the Best Secured Credit Card
If you’re convinced that a secured credit card will help you reach your financial goals, now it’s time to find the best one you for you. Here are five tips to keep in mind while you’re shopping:
Tip #1: Make sure your activity will be reported to the credit bureaus.
This is probably the most important thing to look for when you shop. If your credit-card issuer doesn’t report your account activity to the credit bureaus, you’ll be missing a huge opportunity to demonstrate financial responsibility and boost your credit score.
Tip #2: Look for a card with low fees.
It is more common to pay an annual fee with a secured credit card, but it should be reasonable — under $40 or so. Avoid cards that have an application fee; most reputable issuers won’t charge you to apply.
Another fee to avoid is any sort of monthly account maintenance fee. And if a card issuer pushes you to buy any sort of insurance policy or other add-on to get approved, consider that a huge red flag and walk away.
Tip #3: Ask when you can be considered for an unsecured credit card.
Some credit-card companies will automatically review secured accounts after a certain period, such as a year. At that point, you may be offered the opportunity to convert your card into an unsecured credit card or apply for a new one.
Tip #4: Make sure you have a grace period.
Your grace period is the time between the end of each billing cycle and the date your payment is due. During that period, you can pay for what you’ve charged without paying any interest. Almost all cards have a grace period, but it’s always worth double-checking. If you do have a grace period, it’s legally required to be at least three weeks long.
Tip #5: Ignore rewards.
Most secured credit cards don’t offer much in the way of rewards, but if you find one that does, be careful. Rewards can tempt you to spend more than you should in an effort to obtain points or other perks.
When you have a secured credit card, your only goal should be to show you’re a responsible user by charging a reasonable amount each month that you can pay off in full.
How I Chose the Best Secured Credit Cards
To determine the best secured credit cards, I looked at the following criteria:
- Credit-bureau reporting: I didn’t consider any card that doesn’t report your account activity to all three credit bureaus.
- Credit limit: I looked for cards that allow you to build up to higher credit limits of at least $3,000. I also gave bonus points for cards that didn’t always require a dollar-for-dollar match between your deposit and credit limit, meaning you could potentially be approved for a limit greater than your deposit.
- Unsecured card availability: I looked for companies that explicitly detailed a method or timeframe for secured-card holders to move up to an unsecured card.
- Reasonable fees: It’s typical for secured credit cards to have an annual fee, but it shouldn’t be much more than $40. I also looked for cards without monthly maintenance fees or application fees, and gave bonus points to cards with no foreign transaction fees.
- Reasonable APRs: While this would be one of the most important factors on any other credit-card list, it was a minor consideration for secured credit cards. That’s because APRs are generally high in this category, and using a secured credit card properly means you’ll be paying off your balance before you need to pay interest on purchases. However, bonus points went to cards with lower APRs for purchases and no penalty APRs.
- An opportunity to earn interest: Some card issuers put your deposit in a savings account or CD that can earn interest while you have the card. While that’s unlikely to be a significant amount, it’s better than nothing.
- A long grace period: Credit-card companies are not required to offer a grace period, but most do. I looked for cards that not only had a grace period, but a longer one than the required 21 days.
- Additional perks and protections: I looked for cards with built-in features such as purchase protection, fraud protection, travel accident insurance, and extended warranties.
The Best Secured Credit Card Can Be a Powerful Financial Tool
Secured credit cards represent an opportunity to build or rebuild your credit. While you won’t have the lower APR, higher credit limit, and rewards that are common with unsecured cards, you probably won’t miss these perks if you use your card strategically and responsibly.
For anyone with a military affiliation, we highly recommend the USAA Secured Card® American Express® Card and the USAA Secured Card® Platinum Visa®. Otherwise, you’ll want to identify what matters most to you in a secured credit card. If it’s low fees, try the Capital One Secured MasterCard; if you want a low APR, look at the First Progress Platinum Prestige MasterCard Secured. If you’re serious about quickly graduating to an unsecured credit card, consider the BankAmericard Secured Visa or U.S. Bank Secured Visa.
If you want to learn more about your credit score, what affects it, and how it affects you, you’ll find everything you need to know in our credit score guide. And if you’re interested in other financial tools that may be available even if you have bad credit, we also offer guides to the best bad credit loans and bad credit auto loans.