The Best Secured Credit Cards For Those With Bad or No Credit

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Wondering how you can build your credit history if no one will give you credit?

It’s a common dilemma when you’re just starting out, or if your credit has some past blemishes and you’re looking for a second chance.

Fortunately, secured credit cards offer a solution. They can set you on a path to building (or rebuilding) a credit history you can be proud of.

In this article, we’ll look at:

  • How secured credit cards work
  • What you should look for when selecting a card
  • How to use a secured credit card
  • Our recommendations for secured cards (that when used responsibly can significantly improve your credit score)

Let’s get into it!

How do Secured Credit Cards Work?

Secured credit cards work like regular credit cards in that you charge purchases and subsequently pay for those charges at a later date when billed by the credit card issuer.

Where secured credit cards differ is they’re designed for consumers with bad credit or no credit. Since the consumer hasn’t proven responsible credit management, the card issuer requires a security deposit up front as collateral to grant credit to the applicant.

The amount of the credit limit granted on the secured credit card is frequently the same amount as the security deposit. Security deposits can be returned to the consumer at a later date after managing the card responsibly or at card closing.

What to Look for When Selecting a Secured Credit Card

Even if your credit is bad or non-existent, you still have choices when it comes to getting a secured credit card. However, all secured credit cards are not created equal, so you’ll want to compare cards to find a card you can qualify for that matches your preferences.

Get answers to these questions before you apply for a secured credit card:

What are the requirements to qualify for the card?

  • Some secured credit card issuers do a hard pull on your credit, others do not. Secured credit cards require security deposits, so you’ll want to know the amount required before you apply.

Does the secured card report to the 3 major credit bureaus?

  • You’ll want to make sure the secured card you’re applying for reports your card activity to the 3 major credit bureaus (Equifax, Experian, TransUnion) so this positive activity can help you build your credit history.

Does the issuer offer an unsecured credit card upgrade option once I’ve proven my creditworthiness?

  • It’s always a plus to be able to upgrade your card to an unsecured credit card that does not require a security deposit. Not many secured cards have this feature, but if they do, it’s a good option to have.

How much of a deposit do I need to put down and is the deposit ever refunded?

  • Secured credit cards specifically state the conditions in which you will receive your security deposit returned. You may need to close the account in the future to receive your deposit or receive it after a certain number of on-time payments.

How much is the annual fee? Are there other fees that come with the card?

  • You may have to pay an annual fee to get the secured credit card you want, but you’ll want to compare the amounts between cards. You’ll also want to review the card’s rates and fees before applying.

What is the interest rate if I have to carry over a balance?

  • Ideally, you’ll pay off your balance each statement period. But if you do have to carry a balance, you’ll want to know how much interest you’ll be charged. Some secured credit cards charge as much as 30% APR (by the way, we’ve covered 0% APR credit cards in another post).

Bottom Line: You may not have a strong credit history and the ability to qualify for a premium rewards-earning credit card, but you still have choices when it comes to selecting a secured credit card. Do your homework and select one that fits your situation and objectives. 

How to Use a Secured Credit Card to Build or Re-build Credit

Five factors make up your credit score, and so the best way to build or rebuild your credit is to look at how you can impact each of these factors when managing your secured credit card wisely.

Improving the 5 Factors of Your Credit Score With Your Secured Credit Card

Let’s break down each factor of your credit score and how you can manage your secured credit card to influence those factors positively.

Payment History: 35%

  • Making your payments on time is the most important factor impacting your credit score and therefore the most important factor in managing your secured credit card to positively impact your score.

Credit Utilization: 30%

  • Even if you’re granted a $500 credit limit on your secured credit card, you won’t want to use it all, as doing so affects your credit utilization rate. If you charged $400 in a statement period, for example, you would be at 80% utilization, and this would negatively impact your credit score.
  • It’s better to make small purchases each month and pay them off on time.

Length of Credit History: 15%

  • Selecting a secured card that you can keep indefinitely to build the length of your credit history is ideal. You’ll want to make sure there’s an option to get your security deposit refunded while you still have the card open, or the ability to upgrade the secured card to an unsecured card with responsible card management.

Amount of New Credit and Credit Inquiries: 10%

  • You’ll want to do your research to minimize the amount of new credit and new credit inquiries on your credit history. Make sure you meet the qualifying criteria for a secured credit card to avoid being denied. Remember, hard credit inquiries are counted.

Overall Mix of Credit: 10%

  • It’s good to have a mix of different credit types such as a car loan, mortgage, and credit cards. As you responsibly manage your secured card, you’ll be able to qualify for other types of credit and improve this factor. Fortunately, the mix of credit you have makes up only 10% of your score.

Hot Tip: Check your credit score after a few months of using your secured credit card to make sure your activity is being reported. The practice is also a good educational tool to learn how your credit score is constructed

Finding a secured credit card that earns cash-back is unusual, but a great way to earn rewards while building your credit. Image courtesy of Shutterstock.

Best Secured Cash-Back Credit Card

One of the few secured credit cards that earns rewards, the Discover It Secured Card earns cash-back on every single purchase you make.

While earning cash-back on a secured credit card is unusual, the fact that all of your cash-back earnings are matched at the end of your first card anniversary is a huge bonus.

With no annual fee and the potential to get your security deposit returned in as little as 8 months of responsible card management, the Discover It Secured Card is a good choice to start building or rebuilding your credit history.

Best Secured Cash Back Credit CardDeposit RequiredBenefits
  • $200
  • 2% cash-back at gas stations and restaurants up to $1,000 per quarter
  • 1% cash-back on all other purchases
  • Cash-back matched at the end of your first card anniversary
  • Redeem cash-back for statement credits, cash, or Amazon purchases
  • Reports to the 3 top credit bureaus
  • The security deposit can be refunded after as little as 8 months of responsible card management
  • Free FICO credit score access
  • $0 annual fee

Best Secured Credit Cards With No Hard Credit Pull

If your credit is terrible or you have no credit at all, you’ll be happy to know that you can still qualify for a secured credit card. Since these issuers do not access your credit score with a hard pull (an inquiry that’s reported on your credit report), your chances of getting these secured cards are excellent.

Best Secured Credit Card with No Hard Credit PullDeposit RequiredAnnual FeeOther Card Information

OpenSky® Secured Visa Credit Card

$200 to $3000 depending on credit limit desired$3518.89% APR variable

Green Dot primor Visa® Classic Secured Card

$200 to $5000 depending on credit limit desired$3913.99% APR

You’ll need to provide a security deposit when applying for each of these credit cards, and the amount of your credit limit will be equal to the amount of the security deposit.

Your security deposit will be returned when you close your account, and your balance is paid in full.

Using a secured credit card works just like using a regular credit card, even for renting a car. Image courtesy of Shutterstock.

Best Secured Credit Cards With No Annual Fee

It’s good to know you can find a secured credit card that doesn’t charge an annual fee.

Best Secured Credit Card with No Annual FeeMinimum Deposit RequiredBenefits
  • $200
  • 2% cash-back at gas stations and restaurants up to $1,000 per quarter
  • 1% cash-back on all other purchases
  • Cash-back matched at the end of your first card anniversary
  • Reports to the 3 top credit bureaus
  • The security deposit can be refunded after as little as 8 months of responsible card management
  • Free FICO credit score access
  • $29, $99, or $200 determined by creditworthiness
  • Initial credit line of $200 for a security deposit that could be $200 or less
  • Access to a higher credit limit after the first 5 months of on-time payments
  • Reports to the 3 leading credit bureaus
  • Mastercard benefits
  • $200
  • Reports to the 3 leading credit bureaus
  • Mastercard benefits
  • $500
  • Credit limit equal to funds deposited
  • 13.25% APR variable
  • Reports to the 3 leading credit bureaus
  • Free credit score access
  • No fees for cash advance

Hot Tip: With the Capital One® Secured Mastercard (learn more), it’s possible to receive a credit limit of $200 for only a $29 security deposit if your credit matches the issuer’s criteria.

While the Digital Federal Credit Union secured card has a decent APR, you are required to join the credit union and open an account before you can apply for their secured card; a minor requirement, but an extra step for sure.

Best Secured Credit Cards With a Low APR

Ideally, you’ll want to pay off your secured credit card each statement period, but if you occasionally have to carry over a balance to the next statement period, you will be charged interest. The amount of interest is referred to as an annual percentage rate (APR). Of course the lower the APR, the better.

Unfortunately, secured credit cards normally come with high interest rates that can exceed 30% in some cases. But there are some exceptions: secured credit cards that offer APRs that can be much less than what normal secured credit cards charge.

Best Secured Credit Card with a Low APRAPRAnnual Fee

Green Dot primor® Visa® Gold Secured Card

9.99% fixed$49

First Progress Platinum Prestige Mastercard®Secured Credit Card

10.24% variable$49

Digital Federal Credit Union Visa® Platinum Secured Credit Card

13.25% variable$0

Bottom Line: You won’t have to pay any interest if you pay your balance in full by the statement due date each month but if you occasionally carry a balance, you’ll want to select a secured card with a lower APR. 

Best Business Secured Credit Cards

When you’re starting your business, you’re going to need a credit card. But what if you’re struggling with limited or no credit? Fortunately, there are secured credit cards specifically designed for business owners, and they earn rewards!

Best Business Secured Credit CardMinimum Security DepositBenefitsDrawbacks
  • $500
  • Choose one 3 points per dollar earning category and one 2 points per dollar category each quarter. All other purchases earn 1 point per dollar.
  • Free employee cards
  • Visa travel and purchase benefits and protections
  • Credit limit equals 90% of security deposit
  • Must select earning categories every quarter
  • Foreign transaction fees
  • Limited states
  • $40 annual fee, waived the first year
  • $500
  • Choose cash back at 1.5% on every purchase or choose rewards earning at 1 point per dollar spent
  • 10% bonus when redeeming points
  • 1% cash back bonus on $1,000 spend level per month
  • Free employee cards
  • Visa travel and purchase benefits and protections
  • Foreign transaction fees
  • $25 annual fee

 

The BBVA Compass Secured Visa Business card earns 3 points per dollar on your choice of office supplies, restaurants, or travel purchases and 2 points per dollar on your choice of gas, home improvement, or utilities. The downside is you have to select your categories every quarter or your earnings revert to 1 point per dollar spent.

Points can be used at the rate of one cent each toward account credits, gift cards, travel, merchandise, or charitable donations. The card is only available in Alabama, Florida, Texas, Arizona, Colorado, California, and New Mexico.

The Wells Fargo Secured Business card allows you to select how you earn rewards: either cash back or rewards points. It offers a 10% increase in value when redeeming rewards points online. Your credit limit on the card is equal to 100% of your security deposit versus only 90% on the BVVA Compass Secured Visa.

The Wells Fargo Secured Business card is more widely available than the BBVA card, which is only offered in a limited number of states. The Wells Fargo Secured Business card also has the potential to be upgraded to an unsecured card with responsible card management.

Either secured card would be a good choice for a business with credit challenges.

Other Secured Credit Cards

Secured Credit CardSecurity DepositBenefitsDrawbacks
  • $250 to $5000
  • Open an interest-earning 2-year CD as a security deposit for the card
  • Reports to 3 major credit bureaus
  • Visa- or American Express-associated travel and purchase protections and benefits
  • Security deposit earns interest
  • Free credit score access
  • $35 annual fee
  • $200 to $2,000
  • No credit history or minimum credit score required
  • Reports to 3 major credit bureaus
  • Mastercard benefits
  • $39 annual fee
  • Minimum $200
  • No credit history required
  • Reports to 3 major credit bureaus
  • Refundable security deposit
  • $49 annual fee
  • $250 to $10,000
  • Bad credit accepted
  • Reports to 3 major credit bureaus
  • $39 annual fee

Active military members, former military, an eligible family member, or a cadet/midshipman can join the United Services Automobile Association (USAA) and have access to a wide range of credit card options including secured credit cards.

First Progress offers 2 secured Mastercards that do not require a minimum credit score or a credit history, making it easy to qualify for either of these secured cards.

Tips for Applying for a Secured Credit Card

Applying for a secured credit card is similar to applying for a regular credit card, but some additional considerations are pertinent to the secured credit card application.

Here are a few tips to consider before you hit that submit button on your secured credit card application.

  • Research the qualifications for the card up front to make sure you meet the requirements.
  • Be as accurate as possible when completing the application.
  • Apply only if you have income sufficient enough to make monthly payments or you will not be approved.
  • Apply only if you have enough money to fund the necessary security deposit as it will be needed before you can be approved.
  • Review the fees, rates, and charges thoroughly.

Bottom Line: Applying for a secured credit card is not difficult, but you’ll want to be sure you understand clearly how the card works up front to ensure you’ll be able to use it properly and build or rebuild your credit. 

A Secured Credit Card Alternative: The Credit Builder Account

An alternative to a secured credit card is available with Self Lender. It’s essentially a secured loan that doesn’t require a hard pull on your credit or any credit history. The loan is deposited immediately into a certificate of deposit for collateral. You make scheduled monthly payments on the loan, and at the end of the term, you receive the funds that are in the account.

When you open a Credit Builder account with Self Lender, your on-time monthly scheduled payments are reported to the 3 major credit bureaus, so you’re building credit while you save.

At the end of the period, you receive the balance in the account. Keep in mind that there is interest charged on the loan, but with no hard credit pull or credit history required, it’s an easy way to build credit without having to come up with a security deposit as you would with a secured credit card.

Final Thoughts

Getting a secured credit card can offer a fresh start for bad-credit or no-credit consumers and can help you build a good credit history.

Your good credit can then be leveraged into qualifying for unsecured rewards-earning credit cards that do not require a security deposit and offer more benefits at potentially less cost.

FAQ

How does a secured card work?

Secured credit cards work the same as other credit cards, but they’re specifically designed for consumers with bad credit or no credit.

Because the consumer applying for the secured credit card does not have a positive credit history, a security deposit is required up front in order to qualify for the secured card.

The deposit is held either until sufficient positive history has been demonstrated and the card is upgraded to an unsecured credit card, or the card is closed.

What does a hard pull on my credit mean?

There are 2 types of credit inquiries a card issuer can initiate, a soft pull and a hard pull.

When you apply for a credit card, a hard pull is done on your credit to determine if you qualify for the credit card. Your credit history is reviewed and a record of the action is noted. A hard pull can affect your credit score temporarily, but usually not significantly.

A soft pull consists of the card issuer just looking at your credit. It does not affect your credit score at all.

Can I get denied for a secured credit card?

It is possible to be denied for a secured credit card if you have had a recent bankruptcy, do not have income, or have other negative credit history that doesn’t meet a card issuer’s requirements.

If you’re denied for a secured credit card, you can try to apply for a different secured card that doesn’t run a credit check. These cards can cost a little more, but they will help you get started towards rebuilding your credit history.

You can also apply for a credit builder loan with a credit union.

How does a credit builder loan work?

When you apply for a credit builder loan, you do not receive the money, as it goes into a savings account. Each month, you make payments on the loan. When you have completed the payments, you then receive the loan money.

You will pay interest on the loan, but it’s still a good way to build a credit history because you don’t have to come up with a security deposit and your payment activity is reported to the 3 major credit bureaus.

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