If you have a low credit score, you may worry there’s no way you can improve your finances and get your life back on track. However, this isn’t the case.
There are many ways you can work to improve your credit score. One of these ways is by obtaining a secured credit card.
With a secured credit card, you can take important steps toward repairing your credit history and putting yourself in a more stable financial situation in the future.
There are many different secured credit cards out there, so it’s important that you know which one is right for you. The following sections explain different types of cards you can obtain and how these cards can help improve your finances.
What’s a secured credit card?
You’ve probably seen people using secured credit cards at the grocery store or at a restaurant to pay for their purchases. However, you likely didn’t know that’s what these cards were because they look just like any other credit or debit card.
With a secured credit card, you can make purchases at any store that accepts payment by card. Furthermore, since major credit card companies offer these types of items, it’s easy to confuse them with unsecured credit cards.
They’re different, though. This is especially true in regard to the way these secured credit cards are funded.
With a traditional credit card, you’re given a credit limit each period. This means you can spend a maximum of that amount of money on your card, and then you’re responsible for paying the total back in full. The more trustworthy you are as a borrower, the higher your credit limit is likely to be.
However, if you have a low score and can’t qualify for an unsecured credit card, you might be able to get a secured one. This is because you don’t borrow money with a secured credit card.
When you open your secured credit card account, you’re responsible for paying a deposit on your card. Whatever amount you put down becomes your card limit. You can’t spend any more than this on your card because you can’t borrow any money.
While this might seem limiting at first, these secured credit cards can make it much easier for you to rebuild your credit. That’s because your credit will slowly improve every month when you pay off your secured credit card bill in full.
Can anyone get a secured credit card?
Generally, secured credit cards are easier to get than unsecured credit cards. However, that doesn’t mean that everyone can get approved for a secured credit card.
Secured credit cards are issued by individual companies. This means that each card might have its own eligibility criteria you need to meet in order to get that card. Depending on the card, you may need to meet certain eligibility requirements related to your:
- Credit score and history.
- Debt-to-income ratio.
- Current debt and credit utilization.
- Ability to pay a deposit.
If you meet the requirements set forth by the company issuing the card you want, you’ll be able to get a card. Otherwise, you’ll need to look for another card that you qualify for.
If you have questions about whether you would qualify for a particular secured credit card, talk to a bank near you. A representative at the branch should be able to help you figure out if their bank has a card option that would be good for you.
Is a secured credit card right for me?
You might be wondering, “Should I get a secured credit card?” Secured credit cards aren’t for everyone. However, they can be extremely helpful to people who need help repairing their credit.
There’s no one-size-fits-all rule for determining who can benefit from a secured credit card. However, you can generally determine if you would benefit from having one of these cards if you ask yourself the following questions:
- Can I afford to put a deposit on my card? You can’t start using a secured credit card until you put down a deposit on your card. Some banks have minimum requirements for the deposit you must put down, so make sure you have enough funds to activate your card.
- Can I qualify for a card? Different secured credit card companies may have requirements you need to meet before you can open an account with them. Make sure you meet these requirements before you apply.
- Can I spend my money responsibly? Having a secured credit card can help you repair your credit. However, if you don’t know how to manage your finances and continually overspend in other areas of your life, having a secured credit card won’t necessarily help you get out of debt.
Getting Approved for a Prepaid Credit Card
If you wish to get a prepaid credit card to build credit over time, you must complete a credit card application. This process is similar to the one you would complete if you were applying for an unsecured credit card.
During the application process, the lender may look at different aspects of your financial history to determine if they want to issue a card to you. If you apply for a card at a bank branch, make sure you bring your government-issued ID with you. Otherwise, you might not be able to complete your application at that time.
What secured credit cards are available?
Once you decide that you want a secured credit card, you’re one step closer to taking this financial step. However, it is important to compare several different options to find a card that best fits your financial goals.
If you wish to obtain a secured card, there are many different options available to you. These cards are offered through different companies, which means they might offer different benefits you can take advantage of. Some of the cards you might want to obtain include the:
- Discover it
- Harley-Davidson U.S. Bank Secured.
- U.S. Bank Secured Visa Card.
- Wells Fargo Secured Credit Card.
- Capital One Secured Mastercard.
If you currently have a checking or savings account with a bank that you like, you might want to contact a branch representative to learn about their secured credit card options. Not every bank offers secured credit cards, but many do.
You can also search online for secured credit card opportunities. Regardless of your circumstances, you should be able to find a card that suits your needs so you can begin to repair your credit and get on your way to financial health.