Having trouble getting approved for a regular credit card? Perhaps you should get a secured credit card instead. A secured credit card is a type of credit card that lets you put up a security deposit as collateral for the credit limit. Because you’re backing your credit limit with cash collateral, secured credit card issuers are less picky about your credit history and are much more likely to approve you despite a limited or bad credit history. Take these steps to get a secured credit card.
Scope out the cards you like
There are dozens of secured credit cards on the market, so you have to choose carefully. All the major credit card issuers – and lots of non-major credit card issuers – have a secured credit card, so they’re not too hard to find. Not all the cards are good deals and some are complete duds.
The best secured cards have a low interest rate, low annual fee, and report to the major credit bureaus each month. Another good feature, but not necessarily a must-have, is a secured credit card that converts to an unsecured one after a certain amount of time. If you like the bank where you have your savings or checking account, check out their secured credit card. Read our secured credit card reviews to help you narrow down the options.
Estimate the security deposit you need to make
Minimum security deposits range from $200 to $500, but you can pay more than the minimum if you want to get a higher security deposit. The Capital One Secured MasterCard lets qualifying applicants pay a $49 to $99 minimum deposit for a credit limit of $200.
Once you know how much you need, make a plan to save up by setting aside a certain amount of money each month. After you’re approved, your new card issuer might let you make your deposit in payments, but check to see how much time you have to make the full deposit before your application expires.
Complete the application online, in person, or by mail
If you apply online and given instant approval, the issuer will give you instructions for making your security deposit. You can typically make your deposit online, over the phone, or by mail. Phone or online deposits will allow you to get your card faster than if you have to mail a check or money order. Once the issuer receives and processes your security deposit, they’ll send a credit card to you.
If you’re denied, the card issuer must send a letter in the mail explaining why. It could be that issuer’s credit requirements are strict. It’s ok to try again with a different secured credit card issuer.
It’s easier to get a secured credit card with bad credit, limited credit, or no credit history because many of them don’t do a credit check. However, you can be denied for certain secured credit cards if you’ve been out of bankruptcy for less than a year, you have current delinquencies on other accounts, or you have a negative history with that bank on another account.
Many secured credit cards will automatically convert to an unsecured card after 12 to 18 months of managing your card well. That means making all your payments on time and keeping your balance below the credit limit. If your card doesn’t convert automatically, you can try applying for a regular credit card after a year. There’s a good chance you’ll get approved if you’ve handled your secured credit card responsibly.