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Updated on Thursday, October 1, 2020
Secured credit cards are used as a tool to build a credit history from scratch or put positive information on a credit report after negative incidents such as bankruptcy, missed debt payments or accounts in collections. By feeding positive information into a credit report, you can improve a credit score, which is essential for getting the best financial products on the market.
In order to be eligible for a secured credit card, you must provide a minimum deposit. This deposit typically serves as your line of available credit, but in some cases your line of credit may be higher. Plenty of secured cards require rather hefty minimum deposits of $300 or more, which may be prohibitive for many Americans living paycheck-to-paycheck.
Fortunately, alternatives to the high deposits exist. We’ve pulled together a list of the best secured cards that require a deposit and/or credit union membership fee of $200 or less.
$200 minimum deposit with rewards: Discover it® Secured
The Discover it® Secured has a minimum deposit of $200. This is our favorite secured credit card for a number of reasons, including the ability to earn cash back, and our favorite feature — automatic monthly reviews of your account that start at month eight.
Here are the benefits of the Discover it® Secured in more detail:
Automatic monthly reviews starting at month eight: 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.
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.
Earn cash back: Most secured credit cards do not offer any rewards. With the Discover it® Secured, you have the opportunity to earn cash back while building your credit. You earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases – automatically. 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. A good step in proper credit behavior is to monitor your score each month.
Read our review for more information on the Discover it® Secured.
How to go from a secured card to unsecured card: Discover will automatically review your account starting at month eight to see if you can be transitioned to a card without a security deposit. If you qualify, you can receive an unsecured card and your security deposit will be refunded. Note that the reviews are based on various factors, including responsible credit management across all of your credit cards and loans.
$49, $99, or $200 minimum deposit: Capital One® Secured Mastercard®
The Capital One® Secured Mastercard® offers a minimum deposit as low as $49. If you don’t receive the $49 minimum deposit, you may receive a deposit of $99 or $200. This may be a good option if you don’t have $200 to deposit, just remember that the $49 deposit is not guaranteed. If approved for the card, once you make your minimum required security deposit, you will receive a credit line of $200.
Read our review for more information on the Capital One® Secured Mastercard®.
How to go from a secured card to unsecured card: Capital One has a feature where they will automatically review your account for on-time payments and will inform you if you’re eligible for an upgrade. If eligible, you will be refunded your security deposit and will receive an unsecured card. The catch is that there is no time frame for when your account will be reviewed. Capital One said that it depends on various credit activities.
$200 minimum deposit: Citi® Secured Mastercard®
The information related to Citi® Secured MasterCard® has been independently collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.
Citi® Secured MasterCard®
- Annual fee
- Minimum Deposit
- Regular Purchase APR
- 22.49% (Variable)
The Citi® Secured Mastercard® is a no-frills secured credit card. There is a $0 annual fee and a $200 minimum deposit requirement. There are no rewards associated with this card — however, that’s fairly standard for a secured card. When coupled with responsible credit behavior, this card can help you build credit and work your way to an unsecured card.
How to go from a secured card to unsecured card: Citi will hold your security deposit in a Collateral Holding Account for 18 months. Prior to the 18-month term ending, Citi will send you a notification in the mail informing you if you will be transitioned to an unsecured card. If transitioned, you will receive an unsecured card and your deposit back. If not, you will still have your secured card. The status of your account at the end of the 18-month term and whether you get back your deposit depends on your account history and other credit factors.
Best Strategy for Rebuilding Credit
The strategy for building a strong credit score with a secured card is simple. Make one small purchase each month ($10 or less), wait for your statement to come in, pay your bill on time and in full and then repeat the next month. By making just small purchases, you’ll be using a very low amount of your overall credit limit (also called utilization), which helps drive your credit score up faster because it shows you’re responsible.
Keep an Eye on Your Credit Score and Credit Report
Once you’re in the process of building or rebuilding your credit, it helps to have a benchmark. Do a monthly check in with your credit score to see how it’s improving.
In addition, you should also keep tabs on your credit report by downloading the report from each of the three bureaus. By law, you’re entitled to one free report from each bureau per year. You can download them all at once or space them out throughout the year. Go to annualcreditreport.com to download your free reports. Monitoring your reports will ensure all the information there is accurate and alert you about anything that may be damaging to your score, like an item in collections or reported missed payments.
A Word to the Wise
Never carry a balance on your secured card. The point of a secured card is to be building (or rebuilding) your credit history. Make one small purchase a month and pay it off on time and in full. Follow those two steps and you’ll see your credit score start to raise quickly.