How To Choose A Secured Credit Card To Raise Your Score

There are lots of reasons that that someone may have a low credit score. First, there are young adults and recent immigrants who have limited credit histories. Second, there are those who have negative information on their credit reports due in part to divorce, job loss, medical bills, or just the mismanagement of their finances.

But in order to build or rebuild your credit, you need to open up a new account and make payments on time, every month. Unfortunately, there are few opportunities to open new accounts for people with low credit scores, with the exception of a secured card.

Secured cards are similar to normal credit cards, but they require a refundable security deposit in order to open one. For example, to get  secured credit card with a $500 limit, you would need to put down a $500 deposit. You would still receive a monthly statement, have to make at least the minimum payment every month, and have your payment history reported to the three major consumer credit bureaus.

That last piece is the most important one if you are trying to rebuild your credit. Having a new, positive account on your credit reports that you manage wisely will help build a new credit history or counterbalance negative items on your established credit history.

Important factors to consider

As with any other type of credit card, people who are applying for a secured card should look at the basic terms and conditions of the offer. Start with the annual fee, the standard interest rate, and charges such as those for foreign transaction fees. While most secured cards will require the payment of an annual fee, these fees can vary greatly and there are a few cards that have no annual fee.

You should also consider the size of the security deposit required. Some secured cards require as little as a $50 deposit, while others could be well over $100. Make sure you can afford the deposit amount and have some money left over to pay for anything you charge to the account.

Another important consideration are the benefits offered. Secured credit cards can’t have all of the perks offered by the top travel rewards card, but they may offer some essential benefits. One benefit it rental car insurance is extremely valuable for travelers who wish to avoid the expensive policies offered by car rental companies. Other important benefits can include purchase protection policies, extended warranty coverage, and even a price guarantee program.

For example, the Wells Fargo Secured card offers auto rental collision damage waiver coverage, emergency card replacement, roadside dispatch, and travel and emergency assistance services. It also features a cellular telephone protection program to insure your expensive mobile phone for up to $600 against damage or theft.

Tools to help you rebuild your credit

When looking for a secured card, it’s important to consider it as a path toward building or rebuilding your credit, rather than as simply another method of payment. Look for products that offer features such as a monthly credit score. This feature offers you the opportunity to monitor your credit each month, and can offer positive reinforcement as you see your scores rise with every on-time payment you make.