Looking for the best secured credit card? Take your pick

Secured credit cards are handy for people looking to build a credit history, who may not be eligible for regular credit cards. To get a secured credit card, you’ll pay a deposit, and by keeping a low balance and making timely repayments, you’ll build your credit score quickly.

Secured credit cards

Having a credit card is handy for day to day purchases, and often a requirement if you’re booking a hotel or renting a car. However, to get approval for a regular credit card, you’ll need a credit history. That’s because most credit cards don’t require any sort of security in exchange for their benefits. Instead, the issuing institution takes a look at your credit history to decide if you’re trustworthy enough to lend to.

This can cause a problem if you have a poor credit history - or no credit history at all. If you’re a student and just starting to think about getting a credit card, if you’ve had problems with credit in the past, or if you’re a new arrival in the US, you may not be eligible for a regular credit card at all.

Secured credit cards usually require you to pay a deposit, and the credit limits on offer are typically on the low side - usually the same as the deposit you’ve handed over. However, they do let you build credit history quickly, which is useful if you want to ultimately apply for a regular credit card.

It’s also worth noting that the fees for secured credit cards might be higher than other card types. Interest on unpaid balance amounts can quickly mount up, for example.

If you’re looking for a card to make payments easier in stores and online - or to spend while you travel, you might also consider getting a Wise borderless Mastercard. You won’t build a credit history, but you could cut your fees compared with a secured card or regular credit card.

The borderless card is linked to the Wise borderless account - a smart new type of account you can use to hold balances in multiple currencies. Top up your account fee free in US, Australian or New Zealand dollars, euros or British pounds. Keep your money in whichever currency you want, and switch between currencies when you need to, using the mid-market exchange rate. There’s just a low transparent fee for currency conversion, and then it’s free to spend any balance you hold. That means you can avoid foreign transaction fees when shopping online or traveling - and send money cheaply to friends and family overseas, too.

Choosing the best secured credit card to build credit

Looking for the best secured credit card for bad credit? Or maybe you need the best secured credit card to build credit fast? Here’s a look at some of the most popular secured credit options out there.

Capital One Secured Mastercard¹

Deposits of $49, $99 or $200 and no annual fee. You may get an extended credit line once you have made 5 repayments on time, and can choose the best payment due date for your personal situation.

Citi Secured Mastercard²

Get a card with no annual fee, with a deposit from $200 to $2,500. Your credit limit will be equal to your deposit amount. Your deposit could be kept for at least 18 months, and can be used to cover the outstanding balance if your card is in default.

Discover It Secured³

Cashback on purchases (2%) , and no annual fee. You’ll be able to choose your deposit amount, and each statement shows your FICO score so you can watch your credit history build.

Eligibility

Each card will come with its own terms and conditions, so you’ll need to confirm your eligibility when you apply. For the Citi Secured Mastercard, as an example, you’ll need to pass Citi’s credit assessment, and can’t have been made bankrupt in the previous 2 years.⁴ Credit assessments will typically look at your income and debt, as well as any other available credit information held on file.

Applying for a secured credit card

Here’s an outline of the usual process when applying for a secured card.

1. Select the card for you, and check you’re eligible. You’ll be able to see your credit report online using a site like annualcreditreport.com, or get your FICO score for a fee, to help you choose a card⁵ ⁶
2. Complete the online application, giving personal information and your social security number
3. Your application will be assessed using the provider’s credit checks, looking at income, debt and any other information available
4. Send your deposit payment which is held in a collateral holding account while your card is open
5. Your card will arrive in the mail, and you can start using it. It may take anything from a few days up to 3 weeks to get your card, so be prepared to wait

Secured credit card alternatives

A secured credit card isn’t the only option if you don’t have the credit history to get a regular credit card, or if you need to build credit history. Depending on your needs, an alternative might mean lower costs and more flexibility. Here are a couple of ideas to think about.

Unsecured credit cards

If you’re eligible for an unsecured card, it’s worth comparing the fees and charges you might get against a secured card. Often unsecured cards are cheaper to use, making them a better choice for people with a strong credit history.

Credit Builder account ⁷ ⁸

The Self Credit Builder is an interesting option if your intention is simply to build credit history. This is not a credit card, and you don’t need to pay a deposit. Instead, it’s a savings account which lets you build credit history by maintaining an agreed savings plan and holding your money for an agreed period. You’ll select a period from 12 to 24 months, and agree the amount you’ll pay every month. There’s an admin fee when you set up the plan, so you’ll need to check how the costs compare with alternative options.

Prepaid debit cards

With a prepaid debit card, you’ll top up your balance, and then use your card as you would any other debit card. Most prepaid cards can be used for shopping online and in stores, as well as for ATM withdrawals.

You can’t overspend on a prepaid card. Your card will simply be declined when you have run out of money in your balance. That means you can’t overdraw, and you won’t pay interest charges. However, there are other fees and charges associated with prepaid cards. These vary between cards, but you might find you have to pay a fee to top up your balance, to make ATM withdrawals or to spend in a foreign currency, for example.

Wise multi-currency card

If you want to use a card when you travel, or if you regularly send or receive international payments, a Wise multi-currency Mastercard might be the best option for you. The card links to a multi-currency account, which is easy to open and convenient to use.

You’ll be able to hold your money in different currencies, and check your balance at a glance in the Wise app. Switch between currencies as and when you need to, and spend and make withdrawals using your card anywhere you see the Mastercard logo. Because there are no foreign transaction fees, the Wise mastercard can work out much cheaper than alternative options for spending in foreign currencies.

Frequently asked questions

Not sure if a secured card is right for you? Here are answers to some of the most commonly asked questions related to secured credit cards, to help you decide.

If what you want is the convenience of spending with a card, be sure to look at the free Wise multi-currency Mastercard as a cheap and safe way to spend, no matter where in the world you might be.

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All sources last checked 9 January 2020