Secured Credit Card – For Building Credit

Is a secured credit card right for me?

Secured credit cards are a good first step in building credit for consumers with poor or little to no credit history. You’re pretty much guaranteed to be approved for the card since you will put up your own money as collateral for the credit you’re asking the bank to grant you.  That’s really the only way a secured card is different from a traditional credit card – you either send the bank cash as a security or allow them to freeze a set amount in your bank account. This protects them from losses.

Think of a secured card as your credit line “training wheels” that allow you the benefits of owning a credit card while giving you the opportunity to build a history of responsible credit use with on-time payments. The small credit limits and security deposit requirements are there to protect you from getting yourself into the poor payment history that may have plagued you in the past.  It’s best to establish a limit of at least $300 to effectively build your credit history.  Secured cards typically will charge fees so shop around and read the details carefully.

So once you have your card – how do you best put it to work?  Well, keep in mind that this is NOT your emergency fund and you did NOT establish it for a shopping spree.  Your single purpose in opening this account is to build credit.  So the best way to use it is to buy something very small – perhaps $5-$10, but certainly no more than $20!  This shows the credit bureaus that you are using constraint by not using all of the credit allotted to you.  When the bill comes the first month, immediately pay at least the minimum required payment but leave a small balance for the first cycle.  After that it’s best to pay the card off completely each month.

  • Don’t close the account – this would hurt your scores.
  • Don’t EVER miss a payment or pay late – your scores could drop by 50 points or more!
  • Don’t ever have more than $20 on this account at a given time. A higher balance will immediately lower your credit scores.  Remember, its purpose is to build credit – nothing else.
  • After showing a clean payment history, many banks will refund your security deposit and roll your account over to a traditional credit card.

Recommended Secured Credit Cards

Premier Card: (; Apple Federal Credit Union; Bank of Romney; F&M Bank in Woodstock, VA; CapitalOne Secured MasterCard; First Progress Platinum Secured MasterCard; Primor Secured Visa