Secured credit cards can be a great way to rebuild your credit, but they don’t come without their own “caveat emptor” (buyer beware). Most have annual fees, which are not all that uncommon, even for unsecured cards, but some come with a whole slew of hidden fees that you might not see coming.
So, how will you know which card to choose? Well, the information is available. All credit card companies are required to disclose the information to the consumer. The problem is that it’s not always right there on the front page of the application in big bold letters. Sometimes you have to dig a little deeper. The other problem is that a lot of consumers think they don’t have a choice and that if they are applying for a secured card, they will just have to take whatever crummy deal the company throws at them.
While it’s true you will probably pay a little higher fee for a secured card than an unsecured card, you can do a little shopping around to see which ones offer the most reasonable terms.
Let’s take a look at some of the hidden fees you might encounter…
Annual Fees
Annual fees are not exactly hidden fees, but if you don’t read the fine print, you could definitely be in for a shock. While there are a few unsecured cards that now offer credit with no annual fees, it’s probably going to be the norm for any secured credit card you find. But you can choose to apply for the ones with the lowest fees.
The applied bank secured VISA, for example, starts out with a $50 annual fee, which is pretty standard. But then after the first year, they switch you to a $9.95 per month fee. If you don’t pay attention to that, you could be taken by surprise by this now $119.40 worth of fees.
The Continental Finance Card, and Verve Mastercard’s fees are even higher, charging a whopping $126 annual fee to begin with, and then a $96 annual fee after the first year.
Monthly Maintenance Fee
Some cards include these fees in the annual fee, but wording can be tricky, so you need to make sure you know if this is or is not the case for the card you’re applying for. Usually, if this is a separate fee, it will be listed separately under the same section as shown here:
The Surge Card from Continental Finance charges a whopping $120 a year on top of the regular annual fee just to maintain the account.
Credit Limit Increase Fees
This is a sneaky one. Sure, you can deposit more money and ask for a credit limit increase, but some cards charge a pretty hefty fee to do so.
For example, the First Premiere Bank secured MasterCard charges 25% for every credit line increase. So, if you want to increase your credit line by $100, you will have to deposit $125 to also cover your fee.
Authorized User Fee
If you want to add an additional user to your account, whether it be a spouse or your child, secured credit card companies almost always charge an authorized user fee. These fees vary from card to card, but most are around the $25-30 range.
Processing Fees
As if there weren’t already enough fees, a lot of secured card companies tack on an upfront processing fee, sometimes called a set-up fee, before they allow you to even have access to your money. Total Visa charges an $89 processing fee and the Surge Card from Continental Finance is vague, but appears to charge a $125 set-up fee.
Where to Find Hidden Fees
Now that you know what to look for, it’s important to know where to look. It’s easy to think you can see everything you need to know on the front page of some of the secured websites because they might highlight all of their most favorable terms. But that information is usually just effective advertising and not where they are required by law to disclose all the details.
All companies word their links differently and locate them in different places. Sometimes you might even have to click their “apply” button to actually see a link for terms and disclosures. But they all have one and it will be labeled something like “terms of use,” “rates and rewards” or “full rates and disclosures.”
Once you click on their link, you should be directed to a document or page that looks very similar to this:
Bottom Line
Other terms that can catch you off guard with secured cards are higher interest rates, zero grace periods and higher cash advance fees. The key is to do your research and never apply for a credit card without thoroughly reading the terms of agreement. A secured credit card can be a great tool for you to use to get your credit back on track or build it from scratch, but you do have a choice in the company you choose.