If you want to build your credit or fix your credit, information about the top five secured credit cards can help. It’s difficult to live in today’s world without access to credit:

  • A credit card is needed to buy a plane ticket or to stay in a hotel once you arrive at the destination.
  • In most states, you’ll need a credit card to rent a car—even if you decide to pay for the rental in cash.
  • If the car rental merchant does allow you to pay with a debit card, expect a hefty authorization against available bank funds.

Responsible use of credit cards is important to establishing a good credit rating. Without good credit, it’s more difficult to buy a home or a car at today’s low interest rates.

If you’ve never had credit or if your credit history is bad to fair now, you might not qualify for an unsecured credit card. Look for secured low fee cards to save money.

You need a credit card to establish or build your credit, or fix your credit. That’s where secured credit cards come in. Since not all secured credit cards are created equal, let’s discuss how secured credit cards work. Then, we’ll identify low fee cards that users like now.

What Is a Secured Credit Card?

A secured credit card is a credit line that’s secured by your cash collateral on deposit with the issuer. In most cases, the amount of collateral determines your credit line on the account:

  • For instance, if you send $300 to open the account, the card issuer allows you to charge up to a $300 maximum.
  • After you’ve maintained the account over a certain period, the issuer may let you increase the deposit and increase your credit line.
  • Pay on time and as agreed, and the credit card issuer might extend the credit line without asking for additional cash collateral.

If your credit isn’t perfect, the goal is to find a great secured credit card until you build your credit. A recently discharged bankruptcy or older bank card charge-off can keep you from qualifying for unsecured credit cards. When in doubt about any credit card, contact the issuer and ask questions first. Don’t assume that a secured credit card offer in the mail is preapproved. If you apply for a secured credit card and don’t pass muster, a hard inquiry will remain on your credit files for two years.

Where Do I Apply for a Secured Credit Card?

Becoming a credit union member has its advantages. Many credit unions can help members to get low fee cards. Lower annual percentage rates (APRs) and no or low annual fees to hold the credit card save you money.

If you don’t belong to a community credit union, consider joining before you apply for a new secured credit card. Alternatively, if you’re in the armed forces or affiliated with a branch of service, look for special secured credit card programs there.

How Much Does It Cost to Get a Secured Credit Card?

Many secured card programs require some kind of cash collateral to open an account. Compare annual membership fees and choose the most inexpensive option.

It’s important to study the fine print. Some secured credit cards charge multiple fees to open the account. Your collateral can be consumed by these charges before you make a purchase.

If you want or need a larger credit line, you’ll be asked to submit a higher collateral amount in most instances. The amount of your collateral varies by card issuer. Many secured credit cards have minimum deposits between $300 and $500. The amount of your collateral deposit is used to establish your credit line or, in some cases, determine a percentage higher than the collateral amount.

In some cases, if you make timely payments on the secured credit card account, you’ll automatically qualify for an unsecured credit card. According to the Wall Street Journal, the average time to qualify is about one year.

What Are the Top Five Secured Credit Cards?

Many of the top secured credit cards report to the three major credit reporting agencies (CRAs) as unsecured cards. If you’re concerned about how the issuer reports to the CRAs, it’s important to ask before submitting an application. In the past, some lesser quality secured credit card issuers didn’t report to the CRAs at all. Obviously, if you’re trying to build your credit or fix your credit, it’s essential for Experian, Equifax, and TransUnion to report your payment performance.

Keep in mind that credit card terms and conditions and user agreements can change at any time. Based on user reviews, here are the top five secured credit cards many prefer now:

#5: Capital One Secured MasterCard

Capital One’s secured credit card can help build your credit or fix your credit. Although it’s unclear whether users ever automatically graduate from the secured program to an unsecured card, watch your mailbox as the first 12 months come to a close. Capital One may send additional credit card offers for you to consider.

Take a moment to contact Capital One before you apply, however. Ask how Capital One will dispense your collateral if you’re approved for the new card. Of course, feel free to ask about your likelihood of approval. Unless the letter from Capital One says you’re pre-approved for a new unsecured account, don’t assume that’s the case.

Security Deposits. If you apply for a Capital One secured credit card, you’ll need to establish the maximum credit line at the start. In other words, if you want a $1,000 credit line, you must provide this amount as collateral. You won’t have the option of increasing your credit line by depositing more money with Capital One after that.

It’s possible to receive an unrequested credit line increase from Capital One. The issuer reviews customers’ accounts for possible credit line increases (without the need to deposit new collateral) based upon their responsible use of credit. For instance, if you provided $1,000 collateral and pay on time for six months, Capital One may increase your credit line by a multiple of two or more. Your collateral deposit won’t earn interest.

APR and Fees

If you don’t carry a monthly balance, the Capital One Secured MasterCard is a good deal. There’s no annual fee. Cardholders also receive free access to TransUnion’s credit tracker.

However, if you carry a monthly balance, Capital One charges a 24.99 percent variable rate:

  • With interest rates on the rise, your borrowing cost could increase.
  • If you want to transfer an existing balance from another card, the same 24.99 percent variable rate applies.
  • You won’t be charged a balance transfer fee. If you travel, there are no foreign transaction fees.

If you take a cash advance, the cost of borrowing goes up. The same 24.99 percent variable rate applies plus a three percent transaction fee. The billing period allowance for purchases won’t apply, either, and you’ll start accumulating interest on the cash advance as soon as you receive it. Avoid borrowing cash from the Capital One Secured MasterCard for that reason.

#4: USAA Secured Credit Cards

USAA allows eligible users to choose between a Visa or American Express secured credit card option. Visa is widely accepted, and American Express offers special perks and benefits. For instance, you can use American Express’s concierge service at no additional cost.

Only military members and their families are eligible for USAA secured credit cards. Note that if you’re interested in USAA’s investment programs or life insurance plans, the military eligibility requirement is waived:

  • If you’re eligible for a USAA secured credit card, your collateral deposit is used to fund a two-year certificate of deposit (CD) at USAA Bank. (You won’t earn a lot on the CD because interest rates are at or close to historic lows.)
  • If you decide to increase the credit line, it’s possible to add to your deposit.
  • USAA offers secured cardholders cash rewards (see issuer details about the cash rewards program).

APR and Fees

The USAA secured credit card carries an APR ranging from 10.15 percent to more than 20 percent. USAA assigns an APR based on your credit scores:

  • USAA secured credit cards have a zero penalty APR.
  • The amount of security collateral in the CD account establishes the credit line. This two-year term is fixed.
  • Balance transfers are computed against the APR range (10.15 percent or more). There is a three percent transfer fee and a maximum USD 200 fee. You won’t pay a fee if transferring money from a USAA secured credit card to the deposit account.
  • There are zero foreign transaction fees.
  • Cash advances start accruing interest right away. Don’t withdraw cash from a USAA secured credit card.
  • The annual fee is USD 35/year. (This is a high-average secured credit card annual fee.)
  • Late payment fees are USD 25/first late payment (six months) increasing to USD 35. USAA charges USD 25 for returned checks (first returned check in six months) increasing to USD 35.

Military Benefits

USAA offers many benefits to military members and families, including:

  • Deployment or PCS rate: Four percent on balances up to 12 months during deployment/PCS.
  • If you’re carrying a balance on the USAA secured card when you become active duty, you receive a four percent APR on the balance (up to 12 months after you return from active duty).
  • If you’re active duty, you receive a rebate on interest that accrued during your period of campaign service.

There are many valuable benefits offered to USAA secured credit cardholders. USAA users say this is a valuable secured credit card program.

#3: Discover it Secured Credit Card

Several years ago, applicants for the Discover it secured credit card had to apply for the unsecured version first. If denied, Discover was supposed to refer applicants to the unsecured program but that didn’t always happen.

Today, it’s possible to apply for the Discover it secured card from the start to fix your credit. Discover will automatically review payment history data to determine if and when you may graduate to an unsecured card. Discover automatically refunds the cardholder’s collateral deposit at that time.

If you’re concerned about CRA reporting, it’s possible that Discover might report the Discover it secured card as a secured card. Ask Discover about this fact if you’re concerned that a reporting secured card could lessen your chances of getting credit elsewhere.

Rewards

The Discover it Secured card pays one percent cashback on each purchase:

  • You receive two percent at gas stations and restaurants up to USD 1,000 per quarter.
  • After the cap is reached, you earn one percent on purchases.
  • Once your account is open and in good standing for at least 12 bill cycles, Discover doubles the cashback bonus.

APR and Fees

The Discover it secured credit card has a variable 23 plus percent APR:

  • If you don’t plan to carry a balance from month to month, don’t worry about the APR. Pay all balances before they’re due.
  • Like other secured credit cards, the Discover it secured card requires a collateral deposit to establish the credit line (from USD 200 to 2,500).
  • Check special balance transfer deals. As of this writing, Discover it secured card’s transfer fee is three percent.
  • Don’t take cash from your Discover it credit card. You’ll pay more than 25 percent plus a five percent transaction fee.
  • There’s no annual fee or foreign transaction fee structure.
  • The first late payment fee is waived but, after that, you’re charged USD 35.

Pay your secured credit card bill on time and, preferably, in full. Maintain low balances and soon you’ll build good credit.

Users report that the Discover it secured card is a great credit card. It’s one of the few secured cards that offer cashback rewards. If you want to check how your FICO credit score is improving, Discover it secured credit card offers free access to TransUnion’s FICO score. When you’re ready to graduate to an unsecured credit card, Discover it lets you know in writing that your security collateral deposit is being returned within a short time.

Savings Secured Visa Platinum Card: The State Department Federal Credit Union

Some credit unions, like the State Department Federal Credit Union, offer outstanding secured credit cards to their members. This secured credit card adds a bit of extra cache’ to your wallet while rebuilding your credit.

Anyone can join the State Department Federal Credit Union even if you’ve never worked for the State Department. You must become a member of the credit union to apply for the Savings Secured Visa Platinum card and it’s easy to join.

Simply get a job at the U.S. Department of State or pay USD 15 to the American Consumer Council to secure lifetime membership.

Like most secured credit cards, applying for the Savings Secured Visa Platinum card will create an inquiry on your credit reports. Expect your credit score to decline a few points from the inquiry. When the new credit line appears on your Experian, Equifax, and TransUnion reports, you may see your score drop 10 to 50 points. It’s important to limit the number of credit card applications you make within a short time. Focus instead on limiting the number of credit cards in your wallet and then pay your bills on time each month.

Flexpoint Rewards

Cardholders receive a flexpoint per dollar spent. If you maintain a checking account at the State Department Federal Credit Union, you’ll automatically increase your flexpoints. Use flexpoints for credit union special offers.

APR and Fees

If you plan to carry a balance on your secured credit card, consider the Savings Secured Visa Platinum card:

  • The current APR is variable 7.24 percent APR.
  • There’s no annual fee to hold the card.
  • Zero foreign transaction fees for cardholders.

You must make a minimum collateral deposit of USD 250, and you earn interest from the credit union. Like many other secured credit cards, your collateral deposit establishes the amount of the credit line.

#1: Navy Federal Credit Union nRewards Card

In order to qualify for the Navy Federal Credit Union nRewards secured card, you must be in the military (or a close relation of someone in the military):

  • Eligibility for the program is met if you’re family – household military member agrees to sponsor you for the program.
  • Navy Federal requires a minimum USD 500 collateral deposit to open the secured credit card. If you need a larger credit line, deposit more money.
  • If you’re hoping to build your credit, or fix your credit, the Navy Federal secured card could be a valuable option. This card reports as an unsecured card to CRAs.

Rewards Points

Members earn one point for each dollar they spend. Points are redeemable for gifts or gift cards. For instance, you can earn a USD 25 restaurant gift card for each 3,500 points accumulated. Reward points are unlimited but they do expire. Plan to use points earned within four years.

APR and Fees

The Navy Federal secured card offers a flexible APR rate structure:

  • Good credit is rewarded with a lower APR.
  • Fair credit means you’ll pay more to carry a balance on this card (up to 18 percent APR).
  • Qualified cardholders can score low balance transfer rates and no transfer fees.
  • No foreign transaction fees.
  • Cardholders aren’t charged an annual fee.

Don’t withdraw cash from your card because, like other secured cards and most unsecured credit cards, you’ll pay more for the privilege.