There are dozens of secured credit cards on the market today and determining which the best is depends on what you are looking for. For someone on a tight budget the Wells Fargo secured credit card may be a great choice.
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No matter which secured credit card you choose, the most important thing to remember is to read the fine print. Even if the initial information seems great there could be hidden fees that you do not notice at first. Sites like MyMoney offer great tips on how to look out for these hidden charges.
How is a secured credit card different from a normal credit card?
The main thing that makes a secured credit card different is that is requires a deposit to be held as collateral. This deposit decides the card’s credit limit. These deposit amounts can be between $200 and $5,000 depending on the card.
A secured card is designed to help someone either build their credit or fix their damaged credit. Once the cardholders prove themselves by always making their monthly payments on time and not going over their credit limit they will be upgraded to a normal credit card.
What should I look out for with a secured credit card?
The most important thing to look out for with a secured credit card is hidden fees. Some secured cards require an application fee and some of the less reputable card providers require things like a car insurance policy that charges by the month.
Most well-known credit card providers and banks do not have these kinds of fees and those are the cards you want to be approved for. All secured credit cards charge an annual fee but they can range anywhere from $18 to $50 so do not think you have to be stuck with a high annual fee just because of your situation.
It is also important to make sure the card provider reports to all three credit bureaus. These are Trans Union, Equifax, and Experian. Some card providers only report to one, which defeats the purpose of a secured credit card completely. These cards are meant to help build a good credit history and if your good card habits then it will not reflect in your credit score.
You should also check to see how long it takes to qualify for an unsecured credit card. While most providers require at least one year of spotless card history, but some require 18 months or more.
It is also important to know what type of account your deposit for the card will be kept in. The most common are a regular savings account or a money market account, but some providers put the deposit in a Certificate of Deposit. A Certificate of Deposit does earn more interest over time, but if you have to close the account early it will charge you a fee and you might not get all of your initial deposit back.
What are the terms of some popular secured credit cards?
The Wells Fargo Secured credit card offers the one of the lowest annual fees and interest rates by far. The annual fee is $18 and the annual percentage rate is only 18.99%. This low interest rate can mean big saving for the cardholder since many people get caught up in credit card debt because of high interest fees.
This card also gives the cardholder access to their account online. With this account the cardholder can track their expenses and set up an automatic payment schedule. The cardholder can set up a payment for their monthly credit card bill and set up a payment schedule for their other bills using this card. The online account also has an alerts feature that will send the cardholder an email whenever they are getting close to their credit limit or when they have a payment due.
The Capital Once Secured MasterCard is also a very popular secured credit card. The annual percentage rate for monthly balances as well as balance transfers is 22.9%. The interest applied to cash advances is 24.9%.
The annual fee for this card is $29 and the fee for cash advances is $10 or 3%, whichever is more. Unlike most secured credit cards, the Capital One card has no fee for balance transfers or for going over the credit limit. The fee for returned payments is $35 and for late payments it is $19.
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