How to Choose a Secured Credit Card

The terms of secured credit cards vary widely between card issuers. Here are some of the things to look for before applying:

How high is the annual fee? All secured cards come with an annual fee, and these vary considerably between issuers. There is no need to pay a high fee when you can get a card for much less, so shop around till you find a card with a low annual fee.

Is there an application fee? Some card issuers charge an application fee, some do not. Don’t just go with the first offer you come across, but look for an issuer that will process your application for free.

Do other fees apply? Some secured cards come with a monthly maintenance fee and/or fees to increase your line of credit or to access your bill online. If you can, choose a card that does not charge for these services.

Does the issuer report to all major credit bureaus? Most card issuers report your payment history to at least one of the major credit bureaus. However, since a main advantage of getting a secured card is to help you restore your credit history, make sure to pick a card that reports to all the major bureaus. Of course, if you default on your payments, this will become a double-edged sword. If you are not sure you are able to keep up regular payments on a card, you are better off going with a prepaid card, where you can only spend the money you have.

How long will it take to qualify for an unsecured card? Most secured cards come with higher annual fees and interest rates than regular credit cards, so it’s in your interest to shift to a regular, unsecured card as soon as possible. If you are a good customer, most issuers will offer you an unsecured card after about a year, but verify this before signing up. To make sure you qualify, show that you have enough discipline to use a secured card responsibly. Always pay on time and, as frequently as possible, pay your balance in full every month.

Published: May 22, 2009