Q: Which credit card is for someone who has no credit history?
A secured credit card usually will require a savings account with a balance of $200 or more and will then issue a card limited to this amount. The benefit of this type of card is that not only do you have a credit card like any other, but more importantly, a secured card develops credit history. You should confirm that the card will be reported to all three major credit reporting agencies. One thing to ask for in getting such a card is if they will offer you an unsecured card after a designated period of on-time payments.
Secured credit card programs routinely report to one or all three credit bureaus, not for only negative comments such as late payments. But because on-time payment history accounts for over 33 percent of your credit score, on-time payment of any secured debt is the fastest way to build a good credit history. Of course, you never want to be late with any payment as this is the same as pouring a bucket of ice water on your credit building efforts.
When seeking a good secured credit card, find out if your savings will draw interest and how much interest you have to pay on card balances. If there is a promotional offer, ignore it and base your decision on the regular interest rate. Check for anything else you might be seeking in a card such as cash back or rewards. Usually a secured card won't have these features, but occasionally rewards do exist.
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