Surprise! Secured Credit Cards Aren’t Just For Bad Credit
If you have bad credit, you may think that a secured credit card is your only option. But I’m here to tell you – that’s not true! Secured cards can be great tools for rebuilding credit, but they’re not the only choice. In fact, there are some surprising unsecured card options that can work for you, even with less-than-perfect credit.
In this article, we’ll look at the pros and cons of secured and unsecured cards, as well as some factors to consider when applying. We’ll also highlight some of the top picks in both categories. My goal is to empower you to make the best credit card choice for your situation. Rebuilding credit takes time and discipline, but the rewards are worth it!
-What is a Secured Credit Card?
Let’s start with a quick refresher on secured cards. These require an upfront security deposit that becomes your credit limit. The deposit is typically at least $200, but can be higher. It’s held in an account by the card issuer as long as your account remains open.
The biggest benefit of secured cards is that they’re more readily available to folks with poor credit. The deposit reduces the issuer’s risk, making approval easier. Secured cards also help establish positive payment history when used responsibly, which can boost your credit scores over time.
On the flip side, secured cards tend to have lower credit limits and fewer perks compared to unsecured cards. And while your deposit is eventually refundable, it’s temporarily inaccessible while securing your account.
When Do Secured Cards Make Sense?
Here are a few instances when a secured card may be your best first step:
-- You’re new to credit with limited history
- You’re rebuilding after credit mistakes like missed payments
- Your credit scores are below 600
- You’ve been turned down for unsecured cards
Again, secured cards allow almost anyone to start building credit through on-time payments. Just be sure to choose one with low fees. And you may be able to upgrade to an unsecured card down the road!
Unsecured Cards Aren’t Off Limits
Now, let’s get to the good part! While secured cards are common for bad credit, they aren’t your only option. Many lenders also offer unsecured cards to folks with less-than-perfect scores. The key is finding the right match for your credit profile.
Unsecured card perks include:
- No upfront deposit needed
- Potential for higher credit limits
- Access to sign-up bonuses and rewards
The catch is that approval for unsecured cards depends heavily on your credit scores and history. Those with very poor scores often get denied. Minimum credit requirements typically range from fair to average.
However, don’t let that discourage you! Here are some tips for getting approved:
-- Apply for cards that match your credit range
- Only apply for one card at a time
- Highlight any positive credit history
- Consider becoming an authorized user first
Taking it slow and steady wins the race. If your first attempt is unsuccessful, continue building your profile and try again down the road.
Our Top Picks for Bad Credit
Now let’s look at some of the top secured and unsecured card options for bad credit. I’ll summarize the key details for each.
Best Secured Card: Discover it® Secured Credit Card
- No annual fee
- Cash back rewards
- Chance to graduate to unsecured card
Discover offers great cardholder perks and tools for building credit. Their secured card earns 2% cash back at gas stations and restaurants (up to $1,000 in combined purchases each quarter).
-Runner Up: Capital One Secured Mastercard
- No annual fee
- Low minimum security deposit ($49, $99 or $200)
- May graduate to unsecured card
Capital One is a flexible secured card option, with competitive fees and the ability to graduate. The low deposit options also make it very accessible.
Best Unsecured Card: Petal® 2 “Cash Back, No Fees” Visa® Credit Card
- No annual fee
- 1.5% cash back on eligible purchases
- No late fees or overlimit fees
Petal sets itself apart with great cash back earnings and lack of punitive fees. It’s a standout pick for folks with fair to average credit.
Runner Up: Surge Mastercard®
- No annual fee
- Cash back and travel rewards options
- Cell phone protection
The Surge Mastercard from First Progress offers two rewards options and some nice perks. It’s a flexible card for average or rebuilding credit.
Which Card Is Right for You?
As you narrow down your options, here are some key factors to consider:
- Your current credit scores and history
- Whether you need an initial security deposit
- Fees for the card, including annual, monthly, etc.
- Available credit building tools and perks
- Pre-qualification options to check approval odds
Be sure to only apply for one card at a time, as multiple applications can dent your credit scores. Also note that approval isn’t guaranteed for any credit card.
Tips for Using Your Card Responsibly
Once approved, using your new card wisely is critical for credit building. Here are some tips:
- Pay your bill on time and in full each month
- Keep your utilization low (under 30% of your limit)
- Set up autopay to avoid missed payments
- Review statements regularly for errors
- Avoid maxing out your credit limit
With good financial habits, you can establish positive credit history and see your scores improve over time. Be patient and persistent!
Take Control of Your Credit Situation
Bad credit doesn’t have to keep you down forever. Whether you start with a secured card or manage to qualify for an unsecured option, there are plenty of paths forward.
Choose an affordable card from a reputable issuer, use it wisely, and watch your credit transform. You’ve got this!
Did you learn anything new about credit cards for bad credit? Do you have a success story to share? Let me know in the comments!
References:
[1] https://www.nerdwallet.com/best/credit-cards/bad-credit
[2] https://www.forbes.com/advisor/credit-cards/best/bad-credit/
[3] https://www.lendingtree.com/credit-cards/best/bad-credit/
[4] https://www.bankrate.com/finance/credit-cards/bad-credit/
[5] https://www.cardrates.com/advice/best-secured-credit-cards-for-bad-credit/
[6] https://www.creditkarma.com/credit-cards/secured-credit-cards