Ryan always had good credit. He paid all his bills on time and never overdrew his credit cards. He had no problem qualifying for a loan when he wanted to make a larger purchase, and always handled his debt responsibly. Unfortunately, when he lost his job, he got behind on bills and started missing payments. Before long, his credit report was filled with red flags and his credit score was in shreds. When Ryan finally found a new job he struggled to rebuild his credit. Because of his low score, he struggled gaining access to credit. And because it was so hard accessing credit, he struggled to rebuild his score.
Ryan is not alone. Roughly a third of Americans have poor credit. Many of these individuals desperately want to improve their credit, but don’t know where to begin. While there are several strategies to rebuild your credit, one of the most important is to re-establish a positive credit record with a secured credit card.
A secured credit card requires you to put down an initial deposit for the privilege of using the card. The credit card issuer holds this deposit to protect themselves in case you default. Although this arrangement might sound like a bad deal to someone with good credit, a secured credit card is one of the few opportunities for someone trying to rebuild their credit to start re-establishing a positive credit history.
All secured cards are not equal, however. Different cards come with a variety of distinctions. Different cards come with a variety of annual fees and other annual fees. Some cards are also quicker to bump you to a higher credit limit, or better yet, graduate you to an unsecured credit card. But perhaps most importantly for someone who is struggling financially, secured cards require a wide range of opening deposits. When you’re struggling to pay all the bills at the end of the month, it might be hard to put down a large deposit on a secured card for purchases that you haven’t even made yet. With that in mind, the following 5 cards are ones that require a smaller deposit, while also scoring well in other areas, setting them well above the fray.
Secured MasterCard From Capital One
This secured card from Capital One requires a $49, $99, or $200 deposit, depending on your credit. While this isn’t the lowest minimum deposit out there, what makes this card unique is that your opening credit line will be $200, even if you qualified for the $49, or $99 deposit. Furthermore, after only 5 on-time payments, you’ll be eligible for a credit line increase and you won’t be asked for an additional deposit. As a bonus, this card doesn’t carry an annual fee- an unnecessary expense, especially when money is tight.
Although Capital One doesn’t disclose what kind of credit score you need to qualify for the $49 deposit, this secured card is probably best for people who have fair credit. However, even if you are required to put down the full $200, the guarantee of a higher credit line in 5 months is not shabby either.
DCU Visa® Platinum Secured Credit Card
The secured credit card from Digital Credit Union simply uses the balance in your savings account as the security deposit. Since the minimum opening deposit in a DCU savings account is $5, this essentially makes the startup cost of this card $5, although DCU requests that you make a small donation to one of many charitable options as part of starting an account. Note that DCU will provide you a credit line up to the amount you have saved — if you’ve got $500 in your savings account, expect at $500 credit line.
Once again, you avoid an annual fee with this card, keeping it among the best. This card also comes with a generously low APR of 12.5%- roughly half the APR on many other cards. Furthermore, increasing your credit limit is as easy as adding money to your savings account.
Discover It Secured Credit Card
While still modest, the $200 deposit on this secured card is certainly higher than $5. However, the card makes up for the slightly higher deposit by carrying all the benefits of Discover’s unsecured card, including no annual fee, and more notably, cash-back bonuses on all purchases. It wouldn’t be unrealistic to expect to recoup the security deposit in cash-back bonus over a few short years. Use the card responsibly, and Discover will graduate you to an unsecured card, earning your deposit back!
Citi Secured Credit Card
Similar to Discover, Citi’s secured credit card also requires a $200 minimum deposit. Unfortunately this card doesn’t come with the cash-back bonuses of the Discover card, but it is more widely accepted. This card also doesn’t carry an annual fee, still making it a solid option.
OpenSky Preferred Credit Card
OpenSky’s card is the only card on this list that carries an annual fee. However it will also be the easiest card on this list to qualify for, requiring no credit check at all. Because even though the above cards are secured, they still do deny people for various reasons. Also, as far as annual fees go, OpenSky’s $35 annual fee is not outrageous. So while this probably won’t be your forever card, it might be your best option to start establishing credit after emerging from a very rough financial patch, such as bankruptcy, foreclosure, or a string of defaulted loans.