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If your FICO score is on the low side, secured credit cards are one of the best ways to rebuild your credit. These cards require you to put down a security deposit as collateral. But you may be able to get standout features, such as a higher-than-average credit line with the Wells Fargo Secured Visa Card or even cash-back rewards with the Discover it® Secured.
Let’s take a look at why these are two of the Nerds’ favorite secured cards.
If rewards are important to you
When the Discover it® Secured was announced in January 2016, the Nerds were instantly smitten with it. Usually, if a secured card has low fees and reports cardholders’ activity to the credit bureaus, we’re happy. But the Discover it® Secured also offers cash-back rewards, which is extremely rare for a secured credit card.
Cardholders earn 2% cash back on up to $1,000 in combined gas and restaurant spending per quarter, plus 1% back on all other purchases. Plus, there’s a bonus: Discover will automatically match all the cash back you’ve earned at the end of your first year. The card has an annual fee of $0, and after eight months Discover will automatically begin to evaluate your account monthly to see whether you’re ready to move to a regular, unsecured Discover card.
One drawback: the highest available credit limit for this card is a middle-of-the-road $2,500. Even if you don’t plan to spend more than that on your credit card in a given month, it can still make your spending feel constrained. That’s because using a smaller percentage of your available credit is a key factor in building your credit. If your limit is only $2,500, spending more than, say, $750 in a given month can cause a little hiccup in your score. That’s true even if you pay it off in full before the bill is due.
If you want a higher credit limit
The Wells Fargo Secured Visa Card offers something unusual in the secured cards space: a five-figure credit limit. Your credit limit will be equal to your security deposit, so if you’re able to put down the maximum — $10,000 — your credit limit will also be $10,000.
If you’re trying to rebuild your credit but you have substantial assets, the Wells Fargo Secured Visa Card is a great choice. With a higher credit limit, you will be able to keep your credit utilization ratio — the amount you owe compared with your total available credit — as low as possible. That will help you boost your score.
The Wells Fargo Secured Visa Card’s $25. There are no rewards, and there’s no automatic process for transitioning to an unsecured card like there is with the Discover it® Secured.
But if a higher credit limit is your top priority even as you’re building your credit, the Wells Fargo Secured Visa Card is a great choice.
Want more options? Check out NerdWallet’s best secured credit cards. Chances are you’ll find one with the features you value the most.
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