A secured credit card is one that requires a cash security deposit to open an account. This is in contrast to an unsecured card that does not share this requirement.
The primary benefit of a secured credit card is the ability to use it to build or improve your credit history and score.
However, it doesn’t stop there. Here are some of the other benefits of a secured card:
1. Easier to Get Approved
If you don’t qualify for an unsecured credit card, a secured card is the next best thing. And fortunately, since a cash security deposit is required, the lender isn’t take any risk. That almost guarantees your approval.
Consistently applying for unsecured credit cards — just to get denied time after time — is stressful and depressing. Put this in the past by applying for a secured card.
2. Refundable Deposit
Many people why away from a secured credit card because they don’t want to make the cash deposit upfront. While this is a tough pill to swallow early on, keep in mind that it’s refundable as long as you close the card with a zero balance.
Note: Not every secured card refunds the deposit, so make sure you check on this before signing on the dotted line.
3. A Step Toward an Unsecured Credit Card
If your end goal is to obtain an unsecured credit card, it makes sense to start with a secured credit card. The key to success is paying on time every month. Taking this one step further, do your best to avoid carrying a balance.
Once you’ve successfully used your secured card for six to 12 months, check your credit score to determine if it’s time to apply for an unsecured card.
Secured Credit Card FAQs
If all the benefits above pique your interest, it’s time to dig deeper. And that means answering any questions about secured cards that are on your mind. Here’s a good place to start:
- Are you familiar with both the pros and cons of a secured card?
- Have you already attempted to apply for an unsecured card?
- Do you know which secured card is best for you?
- Do you know if the card you want reports activity to the three major credit bureaus? (this is a must)
Now that you’re familiar with the top benefits of a secured card, it’s time to make a final decision.
If you’re searching for a card and realize this is the best place to start, compare offers online to better understand what’s available. Doing so will lead you down the right path.