Applying for a secured card is a simple way to begin building (or rebuilding) your credit history. Secured cards are a way to prove to a lender you can be responsible without a lender having to take much risk. When you open a secured card, you put down a deposit and the lender gives you a line of credit. Typically, your line of credit matches the amount of your deposit. But just like credit cards, not all secured cards are created equal. Below are the five secured cards that don’t charge an annual fee, thus save you money as you build credit history.
Option One – Banks
Our #1 Pick – Discover it® Secured Card - No Annual Fee
Discover offers our favorite secured credit card. Unlike most credit card companies, Discover is ensuring that benefits and rewards traditionally associated only with unsecured credit cards will be available on the secured card. This card is best for people with no credit, or with scores of 670 or less.
Here are the reasons why this card is our favorite:
No annual fee: There is no annual fee on this card. You do need to make a security deposit of $200 or more to establish your credit line. If you want a bigger limit, you will have to make a bigger deposit.
Bankruptcy? No problem: If you have filed Chapter 7 bankruptcy in the past, you can still qualify for this card. It is a great way for people to rehabilitate their credit.
Automatic monthly reviews: Discover will start automatic monthly reviews at month 8. If you qualify, you could be transitioned to an account with no security deposit. Even better, you could potentially be eligible for a bigger credit limit. This feature really sets Discover apart from the competition – and your goal should be to get back your deposit as quickly as possible through responsible credit behavior.
Earn cash back: Most secured credit cards do not offer any rewards. With Discover it®, you have the opportunity to earn cash back while earning rewards. You can earn 2% at restaurants and gas stations (on up to $1,000 of spend each quarter). Plus, get 1% cash back on all your other purchases. Earning cash back is not the primary reason to select a secured credit card, but it is a nice option to have available.
Free FICO Credit Score: Discover will provide you with a copy of your official FICO credit score. If you use a secured credit card properly, you should expect to see your score increase over time. And by providing your FICO score for free, you will be able to watch your improvement.
If you are declined by Discover, this could be a good back-up option. In order to qualify, you cannot have filed for bankruptcy in the last two years. Citi will hold onto your deposit for 18 months. Unlike Discover, there is no cash back available and Citi will not perform annual eligibility checks to see if you can be approved for a standard card.
Here are the key facts:
- $0 Annual Fee
- Provide a security deposit between $200 and $2,500. Your credit limit will be equal to the amount of the security deposit you’ve submitted.
- 23.49% Variable APR
If you currently can’t afford the $100 – $500 deposit, consider the Capital One® Secured Mastercard® with a $49 minimum deposit for a $200 line of credit with an annual fee of $0.
However, this deposit is based on what Capital One deems as “creditworthy.” It is possible it will ask for a deposit of $99 or $200.
Option Two – Your Local Credit Union
If you belong to a credit union, go there and ask. They probably have a no annual fee option and could set you up right away. It doesn’t hurt to ask a bank either, but they are less likely to have a no annual fee option.
Option Three – Credit Unions “Anyone Can Join”
If you don’t belong to a credit union, or don’t like the secured card options your bank offers, below are three no fee cards from credit unions anyone can join. While it may cost as much as an annual fee to join the credit union, there is also an added benefit of being a credit union member for life.
These are ranked by lowest to highest minimum deposit
Justice Federal: Visa Classic Secured Credit Card
- Cost to join – $5 to join JFCU or $43 if you need to join another organization to become eligible
- Minimum deposit – $100
EligibilityUnfortunately, not everyone can easily join Justice Federal Credit Union. JFCU provides financial services to employees of Justice, Homeland Security and the Law Enforcement Community, as well as their family members. If you believe you may qualify, then check the credit union’s member eligibility page. Those who qualify, will need a five dollar deposit and to fund their account.
However, there is a loophole. One of the eligible associations for membership is the National Sheriff’s Association. It costs $41 to join the NSA as an auxiliary member or student. By joining the NSA first, anyone can then become a member of the Justice Federal Credit Union. This brings the cost of membership to $46.
The Secured CardVisa Classic Secured Credit Card
- No annual fee
- 16.90% APR non-variable
Credit limits ranging from $100 up to 110% of pledged shares
- Cost to join – $1 to join the credit union (which the SDFCU usually covers) + $5 (or $15) to join American Consumer Council, if you don’t work for the Department of State.
- Minimum deposit – $250
The Secured CardEMV Savings Secured Visa Platinum Card
- 7.99% APR
- No annual fee
- Minimum deposit –$250
Digital Federal Credit Union (DCU)
- Cost to join – $5 to join DCU + membership costs to join eligible organization if you aren’t eligible
- Minimum deposit – $500
EligibilityYou must be a member of DCU in order to apply for the secured card. You can be eligible to join DCU if a relative is already member, if your employer offers membership or your community is included within field of membership. If none of these apply, you can join an organization with member privileges. Joining these organizations range in membership cost from $25 to $120. Once you join DCU, you have a lifelong membership, so you could cancel a membership with the other organization after joining.
The Secured CardVisa Platinum Secured Card
- No annual fee
- 12.50% variable APR (18% penalty APR)
- Minimum deposit – $300