Credit Authority Staff

Secured Credit Cards 2013 - The Breakdown

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Across the many available credit card products available, it’s popular for most banks or credit card issuers to provide a secured credit card or a prepaid credit card for people who are rebuilding their credit score.  This article is devoted to helping people understand what a secured credit card is, who should be using one, and how to find the best secured credit card for you.

What is a Secured Credit Card or a Prepaid Credit Card?

A secured credit card is a credit card that requires the cardholder to put down a deposit in order begin accumulating a balance on their card  Their credit limit will either be a larger percentage of the deposit they put down, or possibly the deposit itself.  This is different than a prepaid card because you do not have to pay a balance to the credit card and "re-charge" it to use it.  Rather, you'll make a deposit at the beginning of using the card, and you will have access to that level of credit.  Because of that, prepaid cards and secured credit cards function very differently.

Why do credit card companies issue secure credit cards and prepaid credit cards?

Credit Card Companies view secured credit cards or prepaid credit cards as lower risk, so they are willing to issue them to people who might not have credit history or might be rebuilding their credit.  This is because the deposit covers whatever cash they’re loaning out on a monthly basis, so if the cardholder defaults on payment (doesn’t pay their charges) the bank just keeps the deposit.  Both secured credit cards and prepaid credit cards are great options for people interesting in rebuilding credit.

Who should apply for a Secured Credit Card?

Secured Credit Cards are perfect for people who have had some trouble with their credit history in the past or are having trouble applying for their first credit card.  They are the first step towards building a healthy credit score.  If you don’t fall into either of these categories, instead of a prepaid card or secured credit card we’d recommend reviewing our Rewards Credit Card page.

What are the Best Secured Credit Cards?

Here at credit-authority, we’ve reviewed what we consider to be the top 3 secured credit cards in the marketplace today.  Find our breakdown below:

3rd Place - Applied Bank Secured Visa Card Gold

Overview :

Applied Bank is a Delaware headquartered bank that specializes in offering financial vehicles for people interested in rebuilding their credit.  They’re FDIC insured, and have been in the secured credit card business since 1996.  Their Visa Gold secured credit card offers variable credit limits from $200 to $5,000 (that needs to be supported by a deposit) with low fixed APR month to month at 9.99%.

The Advantages :

·  No Credit Requirements - anyone can Apply for this card, put down the deposit, and begin using the credit card.

·  Low fixed interest rate of 9.99%

·  Automatic reporting to the major credit bureaus

·  Flexible Credit Limits

The Disadvantages :

·  Steep Annual fee of $50

·  Minimum Deposit of $200

·  No Grace Period – you start paying interest the second you apply a charge to the card

Credit Authority Verdict:

2.5– This is a barebones Secured Credit card that does exactly what it’s supposed to – help people rebuild credit.  The Annual Fee is steeper than some other cards, but it does offer higher limits up to $5000.  The standout fact about this card is that you pay interest on your purchases no matter what – imagine adding 10% to the price tag of anything purchased with the card.  The only time this makes sense is if cardholders are absolutely certain they’ll be carrying a substantial balance month to month, in which case locking in the relatively low APR makes sense.  Otherwise, steer clear.  Read more about the Applied Bank Secured Visa Card .

2nd Place - First Progress Platinum Select Secured Mastercard

Overview : The Platinum Select Secured Mastercard from First Progress is a secured Mastercard provided by the First Progress Bank, which is a subsidiary of the large Synovus Bank group of banks in the Southeastern United States.  Similar to the other credit cards in the category, this credit card provides a credit limit that depends upon a deposit placed by the cardholder. 

The Advantages:

·  Reasonable Annual Fee of $39

·  Credit Limits available up to $5,000

·  Credit Bureau Reporting

·  Mastercard Perks

·  Low Interest Rate of 14.99%

The Disadvantages:

·  Minimum deposit of $300

·  Historically increasing interest rates

Credit Authority Verdict:

4.0 – First Progress' Secured Mastercard features a relatively low annual fee combined with a lower interest rate.  Because of this, we think this is a very competitive card in the secured mastercard category.  Our only criticisms would be the relatively high deposit amount and the inflexibility in how you can pay it, making this card more difficult to build credit with unless you already have a substantial amount of money in the bank.  Other than that, the low interest rate coupled with the high maximum credit limit makes this an appealing card.  Read more about the First Progress Platinum Select credit card here.

The Winner - Capital One Secured MasterCard Credit Card

Overview: The capital one secured mastercard is an industry favorite and one of the only secured credit cards offered by a major issuer, Capital One.  It has automatic reporting to the three major credit bureaus and low fees when compared to comparable secured credit cards in the category.

The Advantages:

·  Low Annual Fee of $29

·  Pay your minimum deposit (at least $200) in installments over a period of 80 days

·  Automatic Reporting to Credit Bureaus

·  Issued regardless of credit-history

·  Credit Tracking Tool to monitor your progress with the major credit bureaus

The Disadvantages:

·  High monthly interest rate at variable 22.9%

·  Maximum deposit of $3,000

Credit Authority Verdict:

4.5 – the low annual fee combined with the ability to pay your initial deposit over time makes this card best-in-class for secured credit cards.  The major disadvantages are the maximum limit for the card of $3,000, which means this card is not particularly effective for large purchases, in addition to the high APR.  This card will be very expensive to carry a balance on month to month – so in order for it to be effective, we recommend ensuring that balances are paid off in a timely manner.  All in, the high interest rate is offset by the card’s flexibility, and the credit monitoring tool will help cardholders monitor their standing with all of the ratings bureaus.  Find more on our Capital One Secured Mastercard page.
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