Tiffany Raiford
Credit cards are not the culprit when it comes to bad credit, but secured credit cards are the best way to ensure that those who do have bad credit aren’t getting into any trouble. Credit, in general is important. Without good credit, obtaining a home loan, a car loan, a personal loan or even many jobs in the financial sector is more difficult than ever. It becomes problematic to obtain any sort of financing when your credit report reads like the who’s who of people that don’t pay their debts on time.
Poor credit = unreliable borrower. Good luck getting a loan or credit card from lenders who see that you have a shady past paying your debts in a timely fashion.
That’s where the best secured credit cards come in handy. They work just like a credit card but with the financial security of a debit card. You put down a deposit, the lender provides you with a card, you go about your business using your card. To simplify this scenario: You provide a $500 deposit to a card lender and they issue you a credit card with a $500 credit limit. Spend as you see fit, pay the balance each month either in full or at least the minimum payment; the credit card issuer reports your payments – or lack of payment – to the three major credit bureaus.
It’s secure because they already have your money, and if you choose to forgo paying back your credit card, they already have the money. If you do choose to pay it off, many companies will eventually increase your credit limit without an additional deposit and eventually refund you your deposit and switch your card from a secured card to an unsecured card.
This type of credit card is amazing when it comes to keeping you out of trouble. But the key here is that you have to work diligently to keep yourself out of financial trouble, too; a secured credit card can only do so much. It can keep you from running up your debts and never paying them off, but a secured card cannot help you improve your credit score if you are not using it responsibly.
The first step to keeping out of financial trouble is admitting you have a problem. Here’s a little help with that:
“Hi, my name is *insert your name here* and I really do not do a good job of paying my bills on time, my credit is dismal and I need to learn how to use a credit card without getting myself further into debt or financial trouble. This is why I’m going to apply for a secured credit card; I blame my card for my debt, so now I’m going to rely on my card to fix my credit.”
Now that you know you have a problem and you’re committed to improving your credit, you’re going to want to know which are the best secured credit cards and exactly how each one will keep you out of trouble in the New Year; after all, a New Year means a new you.
Open Sky Secured Visa Credit Card
This particular credit card is going to work well to improve your credit and keep you out of trouble because you can apply for this card without a checking account, with very poor credit and you only pay an annual fee of $35. Compared to many secure credit cards, this annual fee is quite low, which means your initial credit limit will not be affected as much as it might with another card, and you are more likely to afford it.
Another way that this card helps your credit is by reporting to all three major credit bureaus, and by not allowing you to upgrade your card to an unsecured card. This means you’ll continue to use your card responsibly without putting yourself into debt the second that the opportunity arises.
Capital One Secure Mastercard
What we like about this card for keeping our readers out of financial trouble is that it’s a great card for those who actually have no credit. Unlike those who have already destroyed their credit score, this is a card for those who haven’t even begun building their own credit score yet. You can get a limit that’s a bit higher than the deposit you put down of either $49, $99 or $200. This is a great way to teach you financial responsibility and provide you with a great way to build your credit.
Furthermore, you are not required to have the full deposit up front. You have 80 days to pay it in full, and that’s something we approve of. While it might not seem like a big deal, this is a great method for teaching you to pay off your balances in a specific amount of time to avoid things like finance charges on special offers – and it means you have to be vigilant.
Furthermore, Capital One provides all cardholders the ability to see their credit report and track their score using their credit tracking tool. It helps keep you informed and in the know. When you are informed, you are more likely to make good financial decisions and stay out of trouble when it comes to your financial life.
Wells Fargo Secured Visa Card
This is a great card to keep you out of trouble while providing you with access to a higher credit limit. Applicants are free to put down a deposit as high as $10,000, providing you with a very high credit limit if you are able to provide that much cash.
This secure credit card reports your spending and payment habits to all three major credit bureaus, does not charge a penalty APR and is likely to eventually qualify for an unsecured limit. The drawback to this card is that too many negatives on your credit report will prevent you from applying for it.
Though we see that as a beneficial aspect designed to keep you out of financial trouble and on track toward building a more appropriate financial future.
Tips for Building your Credit Using a Secured Card
- Pay your bill in full each month – or at least pay the minimum amount due if you cannot pay it off in full
- Spend only what you can afford
- Always pay on time
- Track your payments and spending
- Check your credit report regularly to ensure that your secure credit card company is reporting accurately
- Keep your statements and proof of payment in case you have to prove that a mistake on your credit report is, in fact, a mistake
- Practice keeping your balance either paid in full or below 30% of your available credit for the best results
Staying out of trouble with your secured credit card requires that you learn good spending habits, good payment habits and a new way of approaching your finances. It’s not always easy, but making it a habit means you’re working hard to learn to improve your finances and use them wisely in the future.
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