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Here’s What to Look for in a Secured Credit Card

Committing to a credit card is a big deal. If you feel some trepidation when you consider it, starting with a secured card may be a better option. These cards have features that make them somewhat safer for first-time card owners. They’re also an excellent option for those looking to build credit.


It’s a well-known vicious cycle that you need good credit to get a credit card. However, having a credit card is one of the chief ways to build credit. Secured credit cards can help you escape that cycle and begin your financial journey. In this article, you’ll learn what to look for in a secured card and which ones may work best for you.


Safe Credit Building

When choosing a secured credit card, you want something that will let you safely build credit. Safety is essential if your credit has been damaged in the past. A card that offers some level of protection to you is a huge asset. This protection can be provided in a number of ways, depending on the card.


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A card like the Chime Credit Builder will allow you to set up automatic bill payments. This means you don’t need to worry about remembering to pay on time. Timely payments and total balance payments will do wonders for your credit. Choosing a card that lets you do that automatically can remove some of the stress of card ownership.


Default Protection

Automatic payments are a bonus feature. A crucial part of secured credit cards is their default protection. When setting up your card, the deposit you make ensures that you don’t default on your account. A late payment on your account will still negatively affect your credit. However, you won’t be in debt due to a missed payment on your card.


When deciding which secured card is right for you, make sure you’re only looking at cards that require a deposit. A card that doesn’t need one isn’t a secured credit card. The deposit, a hallmark feature of these cards, reduces the risk to the card issuer and lays it on the user instead. Don’t stress about the risk, though. As long as you maintain regular payments, you’ll get that money back.


Upgrade Options

How do you get your deposit back? By closing your secured card account or upgrading to a non-secured credit card. When you close your account, barring any problems, your initial payment should be returned to you. Better yet, choose a card that will let you upgrade your account once you’ve built up your credit.


Selecting a card that allows that process to happen automatically can help you reach your financial goals more easily. The Discover it® Secured Credit Card is one that provides this service. After you sign up for the card, your account is periodically checked to assess your upgrade eligibility. Once you qualify, the company will change your account status.


Reports to Credit Bureaus

Your ability to upgrade depends on your credit score. Essentially, your credit score determines your creditworthiness. That determination affects your capacity to apply for better credit cards and take out a mortgage or auto loan. Your score is assessed by credit bureaus or credit reporting agencies.


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While there are many of these agencies, only three of them are significant to consumers. These groups determine your overall credit score. It’s imperative that any card you choose reports to these bureaus so that your credit-building efforts will be recorded. All major secured cards file these reports, but it’s worth double-checking to be certain.


Low or No Annual Fees

Another thing to consider is the fees assessed on your card. Frequently, secured cards have a higher annual fee than unsecured ones. These fees make the card more expensive to maintain from year to year, impacting your ability to keep it. Fortunately, there are some low- or no-fee secured card options available.


Do some research, and you’ll be able to find a card that fits your yearly budget. A card such as Capital One’s Secured Mastercard® could be a good fit. It charges no annual fee and also offers flexibility in terms of deposit and credit limit amounts. A minimum deposit as low as $49 makes it easy for a first-time card owner to get started building credit.


Credit Education Tools

As a first-time card owner, you may not know a lot about how credit works. This lack of knowledge is understandable and shouldn’t be a barrier to getting a card. It can, however, make you feel uncomfortable about using your card. This sense of unease is why some companies are now offering credit education tools with their secured credit cards.


For example, the OpenSky® Secured Visa® Credit Card gives you access to educational materials through a website. It also provides credit tips for those just getting started on establishing credit. A downside is that the card doesn’t offer cash back or points of any kind. Other cards that offer education may also provide those perks, so be sure to comparison shop.


Rewards Options

Though rewards aren’t common with secured credit cards, some do offer them. Secured cards associated with more prominent issuers may offer rewards comparable to those from traditional cards. Anytime you’re looking at a card with benefits of some kind, be sure to balance those with other costs. Often, robust rewards can mean a higher APR or other fees.


Reward options are helpful if you’re trying to save for a specific goal, like air miles. If it’s your first card, seek out cards that offer rewards on everyday spending, like gas and groceries. Those are small purchases that will keep your monthly bill manageable. Using them to earn points would be a great way to get the most value out of your card.


Starting — or rewriting — your credit history is a daunting task. Luckily, secured credit cards make it possible with many features that can protect you. After you make the initial deposit, they work just like a traditional card. Make credit building easier for yourself by choosing a card that eases you into the journey. Your nerves, and your credit score, will thank you.

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