Writer: Adam West
Editor: Lillian Guevara-Castro
Reviewer: Ashley Fricker
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While we often hear about families accumulating massive credit card debts, it’s not just the large balances that can cause problems. Even with a single credit card and a modest limit, you can fall behind on payments. This can lead to late fees and interest charges that quickly balloon into thousands of dollars in debt.
By the time you pay off your debt, missed payments might have already impacted your credit score, leaving you in the “bad credit” category. However, secured credit cards can be a valuable tool to help you rebuild your credit.
Secured by a cash deposit that resides in a protected savings account, secured credit cards can be a lifeline to those who would otherwise be rejected for new credit. No matter what your credit looks like, you can likely find a secured card to start rebuilding.
No Annual Fee | No Credit Check | No Minimum Score
“No Annual Fee” Secured Cards for Bad Credit
One of the toughest parts of dealing with poor credit is that interest rates tend to soar, and fees can start to accumulate like a pack of stray cats. This usually happens because low credit scores mean a higher risk to lenders, so they compensate by charging more for nearly everything.
Secured credit cards, on the other hand, present significantly less risk than their unsecured counterparts, so creditors can charge less for these products. For many with bad credit, secured credit cards are one of the only ways to obtain low interest rates and reasonable annual fees. In fact, the annual fees on our favorite secured cards are so low they’re non-existent.
- No annual or hidden fees, and you can earn unlimited 1.5% cash back on every purchase, every day. See if you’re approved in seconds
- Put down a refundable $200 security deposit to get at least a $200 initial credit line
- Building your credit? Using a card like this responsibly could help
- Enjoy peace of mind with $0 Fraud Liability so that you won’t be responsible for unauthorized charges
- You could earn back your security deposit as a statement credit when you use your card responsibly, like making payments on time
- Be automatically considered for a higher credit line in as little as 6 months with no additional deposit needed
- Earn unlimited 5% cash back on hotels, vacation rentals and rental cars booked through Capital One Travel
- Monitor your credit score with CreditWise from Capital One. It’s free for everyone
- Top rated mobile app
- No annual or hidden fees. See if you’re approved in seconds
- Building your credit? Using the Capital One Platinum Secured card responsibly could help
- Put down a refundable security deposit starting at $49 to get at least a $200 initial credit line
- You could earn back your security deposit as a statement credit when you use your card responsibly, like making payments on time
- Be automatically considered for a higher credit line in as little as 6 months with no additional deposit needed
- Enjoy peace of mind with $0 Fraud Liability so that you won’t be responsible for unauthorized charges
- Monitor your credit score with CreditWise from Capital One. It’s free for everyone
- Get access to your account 24 hours a day, 7 days a week with online banking to access your account from your desktop or smartphone, with Capital One’s mobile app
- Top rated mobile app
3. Discover it® Secured Credit Card
This card is currently not available.
Additional Disclosure: This page includes information about the Discover it® Secured Credit Card which is no longer available, and the offer details may be out of date.
While the deposit is necessary to open your secured credit card account, don’t think that deposit will simply disappear. Your initial deposit — and any additional deposits you make over time — will reside in a protected savings account, accruing modest interest, until one of three scenarios take place.
The best outcome for many is if your secured card gets upgraded to an unsecured credit card by your issuer, at which point your deposit (and any earned interest) would be returned to you. Many secured cards will automatically review your account after 12 to 18 months, offering an upgrade if you’ve demonstrated significant credit improvement.
The second case is if you close your account yourself, at which time the deposit will be returned to you, and that’s that. The third, and least desirable, scenario, is if you stop making credit card payments, and the issuer is forced to close your account. At this point, the issuer will use your deposit to cover your outstanding debt and any applicable fees.
“No Credit Check” Secured Cards for Bad Credit
If you’re living with bad credit, the words “credit check” can be more spine-tingling than having a black cat cross your path — and not just because hard credit inquiries can damage your credit score. No, when you’ve already experienced the nightmare of being rejected for credit due to your scary report, then credit checks can be ghastly.
One great thing about secured credit cards is that they carry less risk, allowing issuers to charge lower fees and ease up on credit requirements. In fact, some of our top secured card choices have such lenient requirements that they don’t even run a credit check, including the one featured below. Just complete the application, make your deposit, and start rebuilding your credit.
The credit line you’ll have available for your secured card will depend on the amount you deposit, and a larger deposit will mean a higher credit limit. In most cases, your credit limit will be equal to 90% to 100% of your deposit. Although it may be difficult to put down a large deposit at first, many secured cards will allow you to add to your deposit over time.
It’s typically a good idea to put down a fairly significant deposit, as a larger credit limit can not only be more convenient, but it can also improve your credit utilization rate by increasing your available credit. Since credit utilization (amounts owed) can be worth up to 30% of your credit score, boosting your limit can be beneficial to rebuilding your score.
“No Minimum Score” Secured Cards for Bad Credit
In the secured credit card world, thankfully, even those cards that do check your credit generally won’t judge you for it. Most secured card issuers will overlook bad credit of all types, including that bankruptcy discharge that creeps behind you like a horror-movie villain. And if you don’t have any credit history yet, they’ll help you build one.
As an extra perk, many secured credit cards will also offer you interest rates that don’t feel like highway robbery. Of course, you should avoid carrying a balance if possible, but if you know you’re likely to, you should choose a card that makes it affordable to do so. Take the top-rated secured cards below; here you have options for APRs as low as 9.99%, depending on the size of the annual fee you’re comfortable paying.
This card is currently not available.
7. First Progress Platinum Elite Mastercard® Secured Credit Card
When you’re looking into secured credit cards, especially if your goal is to build or rebuild credit, it’s crucial that your new card reports to at least one, ideally all three, major credit bureaus: Equifax, Experian, and TransUnion.
The credit bureaus don’t actively seek out information; creditors and lenders need to report it to the bureaus for it to show up on your report. Without regular reports on your payment behaviors from your creditors, the credit bureaus won’t have any idea whether you’ve been making your payments as agreed.
Since the whole point of your credit report is to show future creditors that you can handle credit, any product that fails to report that information won’t help you build a positive credit history. (Incidentally, this is why prepaid cards don’t help — or hurt — your credit score.)
What Is a Secured Credit Card?
Generally speaking, secured credit cards work the same as unsecured credit cards. A secured credit card provides a revolving credit line based on your security deposit, and cardowners can carry balances from month to month while making at least the minimum monthly payment.
Many of the same major banks that issue popular rewards cards also issue secured credit cards. Cardholders can purchase goods and services anywhere merchants accept the card’s payment network (i.e., Visa, Mastercard, and Discover). Amex doesn’t offer secured cards. Secured cards bill you monthly, just as with any other credit card.
The sole operational difference between secured credit cards and unsecured credit cards is the deposit. When opening a secured credit card account, you need to make an initial cash deposit.
That deposit remains in a locked savings account that protects issuers against losses if cardmembers do not repay their balances. Issuers design secured credit cards to minimize their risk while they help consumers establish or build credit.
The card issuer will refund your deposit if you close your secured credit account in good standing (i.e., with a $0 balance). More likely, you’ll receive a refund when the issuer automatically upgrades you to an unsecured card.
How Do I Apply For a Secured Credit Card?
Unsecured cards for those with bad credit often come with harsh terms, including high costs and minimal benefits. On the flip side, most secured credit cards offer more favorable terms and are easier to get approved for.
As previously mentioned, the only difference between secured and unsecured cards is the deposit. A deposit protects the issuer from defaults, in which case it uses the deposited money to pay off your account.
You apply online for a secured card by submitting data about your income, debt, and housing expenses. In most cases, the issuer will pull your credit to confirm your information and check whether there is any reason to reject your application.
A couple of secured credit cards bypass the credit check. Naturally, these cards are the easiest to get.
Once you receive approval from the issuer, you must pay the security deposit to get the card. In one case — the Capital One Platinum Secured Credit Card — you may receive a $200 credit limit with a deposit as small as $49.
Otherwise, secured card credit limits match the deposit size, ranging from $200 to as much as $10,000. Some cards have a low initial deposit limit but allow you to add funds to increase your credit limit.
What Credit Cards Can I Get With a 500 Credit Score?
A 500 FICO Score won’t prevent you from getting a secured card that doesn’t check your credit history, such as the opensky® Secured Visa® Credit Card. Other secured cards may accept your application despite a 500 score, but there is no guarantee.
Generally, issuers want to know whether you can afford the monthly payments, which is why they ask questions about your income and expenses.
You may be able to get an unsecured card with a score of 500, depending on the issuer’s policies. Expect these cards to have signup, monthly maintenance, and annual fees, no rewards, and few benefits.
Student credit cards are unsecured and available even without a credit history. They represent the best deals in the credit card marketplace since they offer lower costs and better perks than nonstudent cards.
What Are the Pros and Cons of Secured Credit Cards?
Secured credit cards have more pros than cons, including the following:
- They report your account to all three credit bureaus so you can build credit with responsible use.
- Secured cards are easy to obtain even if you have bad credit, limited credit, or no credit at all.
- You’ll receive a refund of your security deposit when you graduate to an unsecured card.
- Most offer rewards and/or good benefits.
- Lower APRs than unsecured cards for poor credit
- Most secured cards do not charge an annual fee
But no product is perfect:
- Secured cards require a deposit.
- Some secured cards charge high interest rates.
It’s pretty clear that the advantages of secured credit cards outweigh the disadvantages. They are the best credit card to get when you are rebuilding credit.
Can I Be Denied a Secured Credit Card?
No credit product guarantees to approve all applicants. Among the reasons a secured card issuer may turn you down include previous problems with the issuer or not meeting the income requirements.
Other denial reasons may include:
- You are less than 18 years old
- You do not have enough income in relation to your expenses and debts
- You already have a secured card from the issuer
- You are currently in collection or bankruptcy
- The issuer has closed the card to new applicants
- You reside in a correctional facility
An issuer must send you an Adverse Action Notice explaining why it denied your credit card application. If you applied for a starter card that welcomes credit newbies, the notice should list the reasons for rejection, such as low income or the inability to verify your identity. If you treat the notice as an instructional resource, it gives you a better idea of what you must fix before reapplying.
If an issuer rejects your application because you have bad credit, consider taking out a credit-builder loan from a credit union or online provider. In a credit-builder loan, you borrow a sum that goes directly into escrow. You then make monthly payments that the lender reports to all three credit bureaus.
Once you’ve fully paid off the loan, the lender will release the funds to you. By making sure to pay your monthly bill on time, you can work on improving your credit score and boost your chances of getting approved for future credit cards.
Build — or Rebuild — Credit with the Right Secured Card
With the help of a good secured credit card, almost anyone can find a way to rebuild their credit score. A year of responsible use of a secured credit card can improve someone’s credit score enough that their bank or issuer may upgrade them to an unsecured card with a significantly higher credit limit, which can boost credit scores even more through lower utilization rates.
For those who are fighting poor credit scores and bad financial habits, a secured credit card can help spark light at the end of the tunnel — but only when used responsibly. Remember to always, always pay your bills before the due date to avoid both late fees and credit damage, as well as maintaining low balances so your utilization rate stays low, too.
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