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Secured Credit Card Comparison: Capital One vs. Wells Fargo

June 3, 2016
Credit Cards, Credit Cards for Bad Credit
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Rebuilding credit? A secured credit card is easier to get than a regular credit card because of its refundable security deposit, which lowers the risk to the issuer. The Capital One® Secured Mastercard® and the Wells Fargo Secured Visa Card are two of our favorites. Both have low fees and help you build a positive credit history. The biggest difference between them — and what makes them stand out from other secured cards — lies in your options for setting your credit limit.

» MORE: NerdWallet’s best secured credit cards

Let’s look at how they compare.

Capital One® Secured Mastercard®

Usually when you apply for a secured credit card, the amount of your security deposit will be equal to your credit limit. If you put down a $1,000 deposit, your credit limit will also be $1,000.

The Capital One® Secured Mastercard® allows for some flexibility. For an initial credit limit of $200, you can put down a deposit of $49, $99 or $200, depending on your credit score. If you don’t have the money to put down the full deposit at once, you can pay it in $20 installments for up to 80 days after you apply. You can increase your credit line by depositing additional money before activating your account. Once the card is active, however, you can’t add to your deposit for an increased credit line. The annual fee on this card is a stellar $0.

» MORE: Our full review of the Capital One® Secured Mastercard®

The maximum credit limit for the Capital One® Secured Mastercard® is $3,000. If you want a credit limit higher than that, you’ll want to read about the Wells Fargo Secured Visa Card.

Wells Fargo Secured Visa Card

The Wells Fargo Secured Visa Card is like most secured credit cards in that your credit limit is always equal to your deposit. But whereas most secured cards have a maximum limit of $2,500 or $3,000, the Wells Fargo Secured Visa Card goes way beyond that. With this card, you can get a credit limit of up to $10,000.

Even if you can’t imagine racking up $10,000 on your credit card, there is one very good reason to seek a higher limit. Let us explain. A big part of the calculation that determines your credit score has to do with how much of your available credit you’re using. This is called your credit utilization ratio, and a lower ratio is a good thing. In fact, some experts suggest that you use no more than 10% of your available credit at any given time. That means if you have a credit limit of $1,000, you should really avoid putting more than $100 on your card before paying it off completely. That’s barely enough to pay one utility bill or take your significant other for a night on the town. When your limit is $10,000, or even $5,000, the 10% threshold gets considerably bigger.

The 10% standard is for hardcore credit-building. If you just can’t keep your utilization ratio that low, a slightly more achievable recommendation is to try to keep your balance below 30% of your available credit. Setting utilization aside, paying your bill on time is still the most important thing you can do to build your credit score.

But if you can manage to put down a bigger deposit and thereby get a higher credit limit, as the Wells Fargo Secured Visa Card allows, you’ll have a lot more wiggle room if you want to use your credit card for big-ticket items like a vacation or appliances. The Wells Fargo Secured Visa Card’s $25, but that’s still low compared with many other secured cards.

» MORE: Our full review of the Wells Fargo Secured Visa Card

So which card is better?

The choice depends on you. If you have poor credit but significant savings, the Wells Fargo Secured Visa Card will give you a much higher credit limit than most other secured credit cards.

If your credit score is slightly better but you don’t have much money in the bank, the Capital One® Secured Mastercard® will allow you to pay your deposit in $20 increments for several weeks before you activate the card. You may also be able to qualify for a credit limit that’s higher than your deposit.

Both cards charge reasonable fees and report to all three credit bureaus. With responsible use, both cards will help you build a strong credit history over time. It really comes down to how much you’re comfortable putting down as collateral.

» MORE: How to build credit

Virginia C. McGuire is a staff writer at NerdWallet, a personal finance website. Email: virginia@nerdwallet.com. Twitter: @vcmcguire.