Credit cards issued by HSBC used to be a solid option for people with bad credit. Among its offerings was the popular Orchard Bank® Secured MasterCard, whose combination of a relatively low annual fee and a very low ongoing interest rate made it one of the best credit cards for bad credit available anywhere.
Alas, HSBC sold its U.S. credit card business to Capital One in 2012, and the Orchard Bank® Secured MasterCard was discontinued in the process. But not to worry — if you’re looking to build or rebuild your credit, there are still viable options out there for you.
The secured solution
As its name makes clear, the Orchard Bank® Secured MasterCard was a secured credit card. For the most part, a secured card works just like other credit cards: You charge purchases on the card, then you pay those purchases off when your statement comes.
What distinguishes a secured card is that when you open the account, you have to make a cash deposit, usually equal to your credit line. The card issuer holds onto that money in case you don’t make your payments. Because the deposit reduces the risk to the issuer, secured cards are much easier to get approved for than regular cards, also referred to as “unsecured” cards. When you close a secured card or upgrade it to an unsecured card, you get your deposit back.
Secured cards are not the same thing as prepaid cards. With a prepaid card, you “load” money onto the card. When you buy something with the card, the money for it comes out of what you loaded. So it’s your own money all the way. With a secured credit card, you’re borrowing money from the issuer for your purchases, then paying the money back later. The issuer doesn’t touch your deposit. Because the issuer is extending you credit, using a secured card wisely can help you improve your credit score. Prepaid cards involve no credit, so they have no effect on credit scores.
Even with the looser approval requirements of secured cards, approval is not guaranteed, however. You’ll still need to show that you have income to pay your bill, and a bankruptcy on your record could torpedo your application.
The best secured cards
Capital One, which bought the HSBC card business, offers one of the better secured cards on the market, the Capital One® Secured Mastercard®. Learn more about it and other options for people with bad credit in our roundup of NerdWallet’s best secured credit cards.
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