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A secured credit card is a credit card that the consumer must fund prior to using the card. This type of card typically has the same features as an unsecured credit card. The main difference is that the issuer of the card requires the consumer to fund the account due to multiple reasons.
One reason is if a consumer has no credit history at all, then banks do not have any way to gauge the potential payment history of the consumer. This would be a great way to start building a person’s credit history. It’s very common for college students to obtain this type of secured card to get the ball rolling. Another reason is if a consumer is starting to rebuild their credit. This type of revolving credit card is necessary to rebuild one’s credit as the issuing bank typically reports to all three credit bureaus, Equifax, Experian & TransUnion, which in turn would increase the consumer’s credit score if the account would always be paid on time.
The typical way to fund these secured credit cards is with a U.S. bank account. The issuing bank withdraws a one time amount of the consumer’s choosing, anywhere between $200 and $10,000, and keeps the funds in a non-interest bearing escrow account. Once the account is funded, the card is sent to the consumer to be activated and ready to be used. The account balance on a secured credit card may be paid in full upon receipt of the statement or may have a minimum payment due. Either way is fine as long the consumer pays the debt. In the event that the consumer defaults on the account, the issuing bank would put a claim on the deposit the consumer used to fund the card and the consumer does not get this money back.
We believe these are the top rated and most popular secured credit cards in 2024 as they do not charge an annual fee and you can earn rewards without paying a fee!
