Tips for Finding Your Best Secured Card
Written by Curtis Arnold
Posted On: February 12, 2009
N ot all secured cards report to the three major credit reporting companies (Experian, Equifax, and TransUnion). To build or rebuild credit, it’s smart to get a card that does report to all three. Fortunately, many secured cards report to them all, but make sure before you apply.
Where to Look
Most companies don’t actively advertise secured cards. But you can compare secured credit cards offers on CardRatings.com and even apply online. It’s also a good idea to check with your local bank or credit union.
It pays to find a low-fee secured card. You could spend more than $100 a year on a few cards, with their annual fees and hidden processing charges (for “registration” and “setup,” for example). Many alternatives exist, so there’s no point in paying fees like that. Fortunately, the total yearly fees on many secured cards are less than $50. In fact, several have annual fees in the range of $25 to $40, with no processing or up-front fees.
Just because you have no credit or poor credit doesn’t mean you have to settle for the highest rates known to mankind! You should be able to find an ongoing purchase APR in the midteens, although rarely I have even seen rates around 10%. Definitely avoid any rates in the upper teens or above 20%. Shop around, and visit CardRatings.com to see what issuers and cardholders are saying about the newest offerings.
Unfortunately, secured cards normally don’t have introductory rates. One notable exception is being offered as of this writing by Wells Fargo, just to its banking customers: a secured card with a teaser rate of 5.9% for six months. Maybe your bank will be running a special promotion for depositors. Ask!
I can’t stress enough the importance of always reading the fine print. It’s the only way to find out key facts: For example, what happens if you’re late with a payment? And what’s the length of the grace period? Making sure you’re clear on the details will help you get on the right path and build a solid credit history.
It’s a good idea to choose a secured card that helps you make money on your deposit. The good news is that many do, but you should verify this before you make your final choice. You might earn only 1% to 2% in interest, but that’s definitely better than getting 0% on your hard-earned money. Also, if you have to carry a balance on your card, you can effectively offset your finance charges by 1% to 2%.
I hope these tips are helpful. Good luck in finding the best secured card for you and please do share your experiences with us on our active credit forum!
Curtis Arnold, a nationally recognized consumer educator and advocate, has been educating consumers about credit cards since 1998. New! Curtis is the author of "How You Can Profit from Credit Cards: Using Credit to Improve Your Financial Life and Bottom Line" (FT Press, 2008). He is also the co-author of the upcoming Complete Idiot's Guide to Person-to-Person Lending (Alpha Books/Pengiun Group USA, April 2009), a contribitor to The Ultimate Allowance (InnerWealth Publishing, 2008) and is extensively featured in 42 RulesTM for Driving Success With Books (Super Star Press, January 2009).