There are a lot of great travel rewards credit cards out there, but you generally need excellent credit to be eligible for the best offers. Borrowers who are just starting out or rebuilding their credit have fewer options and may want to consider a secured credit card.
Here’s what you need to know about getting a secured card and using it to earn travel rewards.
What is a secured credit card?
Secured credit cards typically require cardholders to provide a cash security deposit equal to their credit limit. The deposit is returned when the borrower upgrades to an unsecured card or closes the account in good standing.
These cards rarely offer rewards, but they do offer a way to prove your creditworthiness to lenders — which can open the door to cards offering rich rewards. Unlike debit cards, payment information from secured cards is shared with credit reporting bureaus, so using a secured card responsibly can help build your credit.
To be considered for a secured credit card, applicants have to show proof of income. Card issuers typically also check credit reports, just like with a traditional credit card. Being in the middle of a bankruptcy, being delinquent on other accounts, or having opened several new accounts recently may hurt your chances of approval.
Secured credit cards can be good tools for rebuilding credit when used sparingly and paid on time. Paying in full is key for avoiding the higher-than-average interest rates secured cards carry, particularly those that offer rewards.
Best secured credit card options for earning rewards
The Discover it® Secured is one of the few secured cards that does offer rewards — but it has a hefty annual percentage rate. The card offers 2% cash back on up to $1,000 in combined restaurant and gas station purchases each quarter and 1% cash back on everything else. Unlike some secured credit cards, it has an annual fee of $0.
For airline miles, US Bank has three co-branded secured cards that offer travel rewards with different airlines:
- Aeromexico Visa Secured: Earns 1 mile per eligible dollar spent. Cardholders also receive one complimentary checked bag per flight and a companion pass good for round-trip travel between the U.S. and Mexico.
- LATAM Visa® Secured Card: Gives cardholders 1 point for every $1 in eligible purchases with no cap, and your first use of the card earns 5,000 bonus points. The card has an annual fee of $0 intro for the first year, then $25.
- SKYPASS Visa® Secured Card: This card has an annual fee of $50; it comes with 5,000 SKYPASS bonus miles after your first purchase and $250,000 in travel accident insurance. You’ll earn an additional 1,000 bonus miles at renewal each year, as well as 1 mile per $1 on eligible purchases.
The bottom line
Some secured cards, such as the Discover it® Secured mentioned above, can be automatically upgraded to unsecured status as a borrower’s credit improves. Cardholders can also request an upgrade manually, or close their secured account and open a new unsecured account as credit improves and more rewarding cards come within reach.
Secured credit cards can be a great tool for rebuilding credit. And as you can see, there are several that can also help you earn miles while you’re getting your credit back on track.
How to maximize your rewardsYou want a travel credit card that prioritizes what’s important to you. Here are our picks for the best travel credit cards of 2020, including those best for:
- Airline miles and a large bonus: The Chase Sapphire Preferred® Card
- No annual fee: The Wells Fargo Propel American Express® card
- Flat-rate rewards with no annual fee: The Bank of America® Travel Rewards Visa® credit card
- Premium travel rewards: The Chase Sapphire Reserve®
- Luxury perks: The Platinum Card® from American Express
- Business travelers: The Ink Business Preferred℠ Credit Card
Planning a trip? Check out these articles for more inspiration and advice:
Find the best travel credit card for you
How to sidestep the potential pitfalls of travel credit cards
Earn more points and miles with these 6 strategies