While we at ReadyForZero don’t recommend using credit cards, there is one type of credit card that can sometimes be useful for people who are climbing their way out of debt. That type of card is a “secured credit card.”
The reason a secured credit card is different than a regular credit card is that it works more like a bank account than like a loan. You start off by making a deposit and the amount of your deposit becomes your credit limit. So if you make an initial deposit of $1,000, then your credit limit on the secured card would be $1,000. When you get the card, you can borrow against your deposit to make purchases on it, and you get billed every month just like a regular credit card. The difference is, since you’re essentially borrowing from your own money, you’re not going into debt!
And the benefit of using such a card is that it can help you rebuild your credit after having credit problems in the past. If you are at the point where you want to improve your credit but you don’t want (or are not eligible for) a traditional credit card, then you might decide to apply for a secured credit card.
In most cases, your monthly payments to a secured credit card will be reported to the credit bureaus and reflected on your credit report.
Of course, there are a few things to think about before getting a secured card. For one thing, most secured credit cards have an annual fee, and they also charge you interest if you carry a balance over from month to month (even though you’re borrowing against your own deposit).
Additionally, the amount that you use to secure the credit card is not money that you have access to in order to make payments. This money is kept in a separate account, and can be claimed by the credit card issuer if you stop making payments.
So, what are the best secured cards?
With all this in mind, we wanted to take a look at the options and see if we could identify some of the best secured credit cards out there. We looked at factors such as annual fees, interest rates, credit limits, and customer service. If you are looking for a secured card to help you begin rebuilding your credit, here are some good options to consider: