Best Secured Credit Cards With Low Deposit
April 2024
Are you looking for a secured credit card with a low cost-of-entry? Read on to learn about the cards with the lowest deposits.
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Borrowers typically use secured cards to establish or rebuild credit. If you make payments responsibly, they can help you build credit and qualify for a higher credit limit.
However, a secured credit card requires you to put down a deposit in order to access your credit line. This deposit reduces the risk for the lender. If you don't pay off your balance, the lender can use your deposit to cover most or all of it.
Someone looking to build credit might consider setting up accounts for multiple secured cards to establish more than one good tradeline in good standing on their report. But the security deposits can add up. So we've put together a list of secured credit cards with low security deposits based on SuperMoney's algorithms and community reviews.
FAQs on Secured Credit Cards With Low Deposits
What is a secured credit card?
A secured credit card is a card that requires you to put down a deposit to access your credit line. This deposit reduces the risk for the credit card issuer. If you don't pay off your balance, the lender can use your deposit to pay it off. Secured credit cards are easier to qualify for than unsecured credit cards, which makes them advantageous for applicants with bad credit.
How do secured credit cards work?
When you make purchases using your secured card, the money is charged against your credit line, like a regular credit card. Your deposit isn't a pool of funds that you pull from, like with a debit card. The security just serves as collateral for the lender.
If you have a balance, you'll have to make a minimum payment every month to stay current. And if you don't pay off your balance in full each month, you pay interest on the carryover balance.
The way secured credit cards work can vary from one lender to the next. In most cases, your credit limit is equal to your deposit. For example, if you deposit $200, you can spend up to $200. But some cards let you earn higher credit limits if you make a certain number of on-time payments. For example, if you make five timely payments on Capital One's Secured Mastercard, you'll get access to a higher credit line without any additional deposit.
Do all secured credit cards require a deposit?
Yes, all secured credit cards require you to make a cash deposit in exchange for a line of credit. Credit cards that don't require a deposit are called unsecured credit cards.
Do you get your deposit refunded at any point?
Yes, the deposit is usually refunded when you close your account with a $0 balance. It may also be returned if you make a certain number of timely payments, and you get upgraded to an unsecured credit card. If the deposit is not refundable, then it's really a fee, not a deposit. However, the exact terms vary by card. Check the terms and conditions of your credit card agreement to find out when your deposit will be refunded. In many cases, the card issuers will return your deposit when you close your account and pay off your balance in full.
Do secured credit cards match your deposit?
Most secured credit cards match your deposit amount up to the maximum limit. However, some will offer you a credit line that is higher than the amount you deposit.
Will owning a secured credit card hurt my credit?
A secured card can help your credit score just as much as an unsecured card. It all depends on how you use it. If you make your payments on time and keep your credit utilization below 30%, it should help improve your credit over time.
Who uses secured credit cards?
Secured cards are a good option if you don't have much credit or have bad credit. It's easy to qualify for one, and they can help you establish a positive line of credit. A secured credit card is like a credit card with training wheels. It works just like a regular credit card, but it you need to add a security deposit to get started.
What pros and cons should I know about secured credit cards?
Secured cards offer many advantages. First, they give people who don't qualify for unsecured credit cards an opportunity to build a positive line of credit. Many people face a frustrating situation where they need credit to build credit. With a secured card, you can pay upfront and get the chance to prove you can manage your credit well.
Another benefit of secured credit cards is that many providers have programs that allow cardholders to upgrade from a secured card to an unsecured card. If you prove your creditworthiness, you may qualify for a higher credit line without an additional deposit.
Secured credit cards may also come with perks like rewards and member benefits. Rewards can include cash back or points on purchases. Member benefits may consist of credit monitoring, fraud protection, rental car insurance, and more.
On the flip side, secured cards do have their disadvantages. You have to have the money to put down upfront to access a credit line. Some cards have very small lines of credit, as low as $100 to $300. Further, you may face fees and APRs that are on the high end.
Overall, secured credit cards can be a good stepping stone for those who can't qualify for unsecured cards and who want to start rebuilding their credit.
Can a secured credit card really help my credit?
A secured credit card can certainly help you improve your credit. Issuers of secured credit cards usually report your account to the three major credit bureaus Transunion, Equifax, and Experian. If you make your payments on time and manage your credit utilization well, you should see an improvement in your credit after a few months.
How should you use your secured credit card?
Secured credit cards should be used as a tool to demonstrate your financial responsibility.
Once you open the account, calculate 30% of your credit line. Then, keep your outstanding balance below that amount. For example, if your credit line is $200, your outstanding balance should never be over $60. This is the sweet spot credit bureaus look for when assessing credit utilization. They want to see cardholders demonstrate control over their finances. Maxxing out your credit and using every last penny available is a big red flag for credit bureaus and lenders.
Additionally, it's best to pay off your balance in full every month to avoid paying interest on carryover balances. However, if you do carry over a balance, keep it under the 30% mark. Lastly, make at least your minimum payments on time or early every month.
Who will qualify for a secured credit card?
The eligibility requirements for a secured credit card are definitely on the flexible side. Standard requirements include:
- Be 18 years old.
- Have no bankruptcy on your credit report.
- Be a qualifying citizen or resident.
- Make enough income to meet your monthly obligations.
How are secured credit cards different from unsecured cards?
Secured credit cards require an upfront deposit, which "secures" the credit line you receive. If you don't pay off your balance, the deposit can be used to cover it. An unsecured credit card does not require the upfront deposit. The lender extends you credit, trusting that you will repay it. Therefore, qualifying for unsecured credit cards requires higher credit scores and more established credit history.
Which secured credit card builds credit fast?
Look for secured credit cards that report to the three credit bureaus (Experian, Equifax, and Transunion) every month. As you make timely payments each month and the company reports your transaction to the credit bureaus, your credit profile should improve.
What else should you consider when choosing a secured credit card?
Aside from the size of the deposit, there are other factors to keep in mind when choosing your secured credit card. Consider the following:
- Prequalification. Card issuers that have a prequalification process will check if you are preapproved without placing a hard inquiry on your credit report. This is helpful as hard inquiries hurt your credit score and stay on your reports for two years.
- Refundable deposit. Some credit card issuers will refund your deposit if you make timely payments for a certain amount of time.
- Fees. Look out for any fees that come with the card, including annual fees, late fees, balance transfer fees, etc. You want to minimize the amount you pay in fees.
- Purchase annual percentage rate (APR). This is the amount of interest you'll pay if you carry a balances. Look for the lowest APR available to you.
- Balance transfer annual percentage rate (APR). This is the amount of interest you'll pay on balance transfers that carry over past a billing cycle. Again, you want to look for the lowest APR available.
- Credit limit. Credit limits on secured credit cards can start very low. Look at the available credit limits to find the highest one available. Additionally, look for issuers who offer automatic credit limit increases with on-time payments.
- Eligible credit score range. Credit card companies often specify the credit score range that a card is designed for. Check to see what credit score ranges a card serves to ensure that it is a good fit.
- Rewards: Certain cards offer rewards for your spending (such as cash back or points). Rewards increase the value a card has to offer.
- Fraud liability. Does the card protect you in case of fraud? Look for cards that don't hold you liable for fraudulent purchases.
- Benefits and perks. Check to see what additional benefits a card offers, such as rental car insurance, credit monitoring, flight insurance, emergency support, and more.
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