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NerdWallet’s Best Secured Credit Cards of 2016

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NerdWallet's Best Secured Credit Cards

Whether you have bad credit or you’re building a credit score from scratch, a secured credit card can speed you on your way to better terms.

Unlike prepaid debit cards, secured cards can help you establish or improve your credit history, provided that the issuer reports your account activity to the credit bureaus, TransUnion, Experian and Equifax. With secured cards, you’re required to make a refundable deposit as collateral, similar to putting a security deposit down on an apartment. That money protects the card issuer in case you don’t pay your bill.

Keep in mind that lending standards vary from issuer to issuer. Spend carefully and pay your bill on time, and you may be able to establish positive credit history in a matter of months.

NerdWallet’s best secured credit cards:

Best for … Card
Low deposit Capital One® Secured MasterCard®
Rewards and upgrading Discover it® Secured Card – No Annual Fee
Bad credit or no checking account OpenSky® Secured Visa® Credit Card

Best for low deposit

Capital One® Secured MasterCard®

Apply Now on Capital One's secure website

Pros

  • Qualify with limited / bad credit
  • No annual fee
  • No foreign transaction fee

Cons

  • No rewards
  • High APR

Bonus Offer

None

Annual Fee

$0

Intro APR Promotions

N/A

APR

  • APR: 24.99% Variable APR
  • Cash Advance APR: 24.99%, Variable

Card Details

  • No annual fee, and all the credit building benefits with responsible card use
  • Unlike a prepaid card, it builds credit when used responsibly, with regular reporting to the 3 major credit bureaus
  • You will get an initial $200 credit line after making a security deposit of $49, $99, or $200, determined based on your creditworthiness
  • Get access to a higher credit line after making your first 5 monthly payments on time with no additional deposit needed
  • Easily manage your account 24/7 with online access, by phone or using our mobile app
  • It’s a credit card accepted at millions of locations worldwide

For a deposit of $49, $99 or $200, depending on your credit, you’ll get a limit of $200. The annual fee is $0.

Benefits of the Capital One® Secured MasterCard®:

  • Unlike with most secured cards, it’s possible to get a credit limit on this card that’s higher than the security deposit you put down. You can get a limit of $200 for a $49, $99 or $200 deposit, depending on your credit.
  • You can make partial payments on your deposit, as long as you provide the full amount within 80 days of being approved. Your account will not be activated until your deposit is paid in full.
  • This card reports to the three major consumer credit bureaus.

Drawbacks of the Capital One® Secured MasterCard®:

  • Because of the lower deposit options, Capital One has stricter underwriting standards for this card. You generally won’t qualify if you don’t have a checking or savings account, if you have a bankruptcy that’s still on your credit report, or if your rent is almost as high as your monthly income, among other reasons.

The bottom line:

Among all of the secured cards on NerdWallet, the Capital One® Secured MasterCard® is the most affordable. Because this secured card comes with more requirements than others, it may not be a good fit for folks recovering from major credit damage, but it could be an excellent match for someone who’s getting a credit card for the first time.

Best for rewards and upgrading

Discover it® Secured Card – No Annual Fee

Apply Now on Discover's secure website

Pros

  • No annual fee
  • 10.99% on balance transfers for 6 months

Bonus Offer

None

Annual Fee

$0

Intro APR Promotions

10.99% on Balance Transfers for 6 months

APR

  • APR: 23.24% Variable APR
  • Cash Advance APR: 25.24%, Variable

Card Details

  • Once approved, your minimum security deposit amount of $200 or more will establish your credit line (up to the amount we can approve).
  • Monthly reviews start at 12 months to see if you qualify to get your security deposit back. Reviews are based on responsible credit management across all of your credit cards and loans.
  • No annual fee. No late fee on your first late payment. Paying late won't raise your APR.
  • Earn 2% cash back at restaurants & gas stations on up to $1,000 in combined purchases each quarter. Earn 1% cash back on all other purchases.
  • Discover matches all the cash back you’ve earned at the end of your first year - automatically. New cardmembers only.
  • Reports to 3 major credit bureaus so you can build or rebuild credit with responsible use.
  • FICO® Credit Score for free on monthly statements & online.
  • Click "APPLY NOW" to see rates, rewards, FICO® Credit Score terms, Cashback Match™ details & other information.

Earn 2% cash back on up to $1,000 worth of spending per quarter on restaurants and gas, and 1% on all other spending. The annual fee is $0.

Benefits of the Discover it® Secured Card – No Annual Fee:

  • The annual fee is $0.
  • The rewards would be pretty decent even if this weren’t a secured credit card; for a secured credit card, they’re unheard of. Rewards never expire, and there’s no minimum redemption amount.
  • There’s no penalty APR for paying late, and no late fee the first time you miss the due date.
  • You’ll have access to your FICO score on your monthly statement, or at any time via your online account.
  • The card reports to all three credit bureaus.
  • After 12 months, cardholders are automatically evaluated monthly to see if they can qualify for a regular, unsecured credit card. When they’re ready, the transition is smooth, it doesn’t create a new account, and all rewards are carried over to the new card.

Drawbacks of the Discover it® Secured Card – No Annual Fee:

  • The interest rate is on the high side: 10.99% on Balance Transfers for 6 months, and then the ongoing APR of 23.24% Variable APR.
  • The security deposit/credit limit options, while not terrible, are neither the highest nor the lowest available. Your deposit will be equal to your credit limit. For some people, the $200 minimum deposit will be a stretch. For others, the maximum $2,500 credit limit will be too low.
  • The initial deposit must be paid with a bank account, making this card unavailable to people without a checking or savings account.

The bottom line

We’re so excited about the high rewards rate, the automatic process for transitioning cardholders to an unsecured card and the $0 annual fee. This card has some limitations, but the advantages outweigh them. If you’re looking to graduate to an unsecured card as soon as possible, and want to earn some plum rewards while you’re rebuilding your credit, this card may be the right choice.

Best for bad credit or no checking account

OpenSky® Secured Visa® Credit Card

Apply Now on Capital Bank's secure website

Pros

  • Qualify with limited / bad credit

Cons

  • Has annual fee
  • No rewards

Bonus Offer

None

Annual Fee

$35

Intro APR Promotions

N/A

APR

  • Purchase: 17.64%, Variable
  • Penalty APR: Up to 21.75%, Variable
  • Cash Advance APR: 17.64%, Variable

Card Details

  • Build Your Credit fast with our monthly reporting to all 3 major credit bureaus.
  • Choose your credit line as low as $200 up to $3000, secured by a fully-refundable* security deposit.
  • Security deposit needs to be submitted before the credit card can be issued.
  • No credit check necessary and no checking account required; apply in less than 5 minutes.
  • Extra credit when you need it, increase your credit line up to $5000.
  • Access to online financial education.
  • *View our Cardholder Agreement located at the bottom of the application page for details of the card.

The annual fee is $35. You can deposit between $200 and $3,000;
your credit limit is equal to your deposit.

Benefits of the OpenSky® Secured Visa® Credit Card:

  • You can qualify for this card within minutes. The bank doesn’t run a credit check and doesn’t require a checking account, unlike other major issuers.
  • Because the annual fee is $35, this card is a relatively affordable way to improve a severely damaged credit score.
  • The card reports to the three major consumer credit bureaus.

Drawbacks of the OpenSky® Secured Visa® Credit Card:

  • You generally can’t upgrade your account to an unsecured card.
  • You won’t qualify for the card if your monthly expenses exceed your monthly income. (This is generally the case with all secured credit cards.)

The bottom line:

If you want to rebuild your credit but are having trouble finding an issuer that will work with you, the OpenSky® Secured Visa® Credit Card could be a good match. Its annual fee is $35 — reasonable, compared with other secured credit cards — and your activity will be reported to all three major credit bureaus, making it easier to rebuild your credit. When it comes to funding the account, you a can use a debit card, do a wire transfer, write a check or use a money order, making it one of the few secured cards that you can use without a traditional bank account.

» MORE: See NerdWallet’s list of credit cards for bad credit

Methodology

NerdWallet’s credit cards team selects cards in each category based on overall consumer value. Factors in our evaluation include fees, promotional and ongoing APRs, and sign-up bonuses; for rewards cards, we consider earning and redemption rates, redemption options and redemption difficulty. A single card is eligible to win in multiple categories.  

Last updated June 22, 2016.

NerdWallet writer Virginia C. McGuire contributed to this article. Claire Tsosie is a staff writer at NerdWallet, a personal finance website. Email: claire@nerdwallet.com. Twitter: @ideclaire7.


Image via iStock.