Many individuals who are just starting out or who have recently been through a difficult experience such as divorce or bankruptcy are looking for ways to build or rebuild damaged credit. While there is no substitute for paying your bills on time and establishing a history of current accounts, obtaining a secured credit card can be a major step toward achieving financial success.
Secured credit cards differ from typical unsecured cards in that the card company secures a deposit from the borrower when the account is opened. There is usually a minimum deposit amount to establish a set credit limit and any deposit above and beyond the minimum increases the credit limit by that amount. Many secured credit cards also charge application fees and annual fees so it’s very important to shop around and compare rates and fees from different companies.
It’s important to note that while the card does require a deposit amount, often equal to the credit limit, secured credit cards are NOT the same as prepaid debit cards. A prepaid debit card does not track purchases and payment history and does not report to the credit bureaus. A secured credit card does – making it a great way to build credit for individuals who cannot get a credit card through any other means.
The Capital One secured credit card is a great example of this option for building credit. This card ranks high for customer service and does not charge an application fee. The annual fee is only $29, making it one of the lowest on the market. The minimum deposit amount is also low, $49 -$199 for a $200 credit limit, depending on your credit worthiness. This deposit is also payable over time, unlike with many other companies.