Digital Federal Credit Union Secured Card Review: Low Costs, High Hurdles

No fees

Cards for people with bad credit are notorious for high fees: annual fees, monthly fees, processing fees, application fees, the list goes on. The DCU Visa® Platinum Secured Credit Card eliminates just about all of them, including ones that are standard on most cards. Beyond the $0 annual fee, the card imposes no fee for purchases outside the U.S., while many other cards charge 3%. Even cash advances are fee-free, and you don't pay a higher interest rate on advances. (Many cards charge a fee and impose a higher rate.) You must put down a hefty refundable security deposit when you open the account. But beyond that, the card costs very little.

Low interest rate

The ongoing APR is 15.75%-18.00%, Variable. That's around 10 percentage points lower than the rates people with poor credit would typically be offered, and it's lower even than rates on many cards for people with good credit. In general, it's best not to carry a balance on a credit card from month to month. If you pay in full, you don't have to worry about interest, and keeping balances low is good for your credit score. But if you have to carry debt, it won't cost as much with this card as it would with many others.

Credit-building help

Security deposit required

The security deposit required to open any secured card account is a barrier for some people. It often requires coming up with hundreds of dollars and tying up that money for as long as the account is open. If you want a high credit line, you have to put up a deposit to match.

The DCU Visa® Platinum Secured Credit Card requires a whopping $500 security deposit, far more than any other card that NerdWallet recommends. Many of them require just $200. That puts this card out of reach for some people who simply can’t come up with $500 or can’t afford to lose use of that much cash.

Your deposit at DCU does earn a little interest while it’s unavailable to you. But in our view, a secured card should be judged on how well it helps you improve your credit so you can ditch it and get approved for a regular unsecured credit card, along with other benefits of having decent credit. A high deposit requirement is a problem because it makes the card too expensive for too many people. (An exception to this criticism is a specific subset of potential applicants: those who have plenty of cashflow but thin or damaged credit. For them, the card shines.)

By contrast, a different card, the Capital One Platinum Secured Credit Card, requires a far lower security deposit. You may be able to qualify to pony up a deposit less than your credit line. A $200 initial credit line can be had for a deposit of $49, $99 or $200. The issuer allows you to pay your deposit in installments. And if you make your monthly payments on time, you could gain access to a higher credit line with no additional deposit required in as little as six months. That’s the kind of flexibility needed by people watching their nickels.

» MORE: Explore credit cards that don't run a credit check

Credit union membership required

With most credit cards, you don't need to have an account with the issuer's retail bank to be approved. Not so with the DCU Visa® Platinum Secured Credit Card. You must be a member of the Massachusetts-based Digital Federal Credit Union. There are several paths to membership:

• You work for or are retired from a participating employer.

• You live, work, worship or attend school in a community that has been designated as underserved, and the credit union has a branch in it.

• You are related to a current member.

• You belong to a participating organization based in Massachusetts. This is the easiest way in for people outside the credit union's service area. For membership fees as low as $10, you can join participating organizations, which include environmental and educational nonprofits and other groups.

Because membership criteria are loose, this requirement may not be a big deal. And more broadly, there are plenty of reasons to love consumer-friendly credit unions. Still, it's another hoop to jump through when applying for the secured card.

No rewards

If you're struggling with bad credit, rewards aren't as important as building good credit. Still, it's nice to get a little something back for your spending. The Discover it® Secured Credit Card requires a minimum deposit of $200, and it earns 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. All other purchases earn 1% cash back. The annual fee is $0.