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Have you been denied for a credit card due to having little or bad credit? If so, the Capital One® Secured Mastercard® could help you get back on the right track. You don’t need a perfect credit score, but you do need to be capable of making payments.
What’s a Secured Credit Card, and How Is It Different from Other Options?
You might be wondering what makes a secured credit card different from a regular credit card or a prepaid card. If you’re familiar with secured loans, secured credit cards work in a similar way: they require collateral. The Capital One® Secured Mastercard® requires that you provide collateral in the form of a cash deposit. This collateral allows creditors to lend to borrowers who don’t have the best credit.
Secured cards are mainly for those who need to rebuild their credit. If you’ve previously been in a lot of credit card debt because of irresponsible usage, or need help establishing credit in the first place, secured cards are a great option.
How does this differ from a prepaid card? Prepaid cards aren’t useful for building credit because the usage isn’t reported to the three major credit bureaus. Prepaid cards function more like a debit card because you’re putting money you already have toward them. No lending is involved.
Details of the Capital One® Secured Mastercard®
If you’re looking to rebuild your credit, the Capital One® Secured Mastercard® is a good choice.
The required security deposit is $49, $99, or $200 (refundable) and must be paid in full within 80 days of your account being approved (you can pay it over time within those 80 days). The amount you need to deposit is based on your creditworthiness, but this is a fairly low deposit compared to other options.
You can’t use the deposit toward minimum monthly payments as it’s used as collateral against your account, and you won’t earn any interest on your deposit while Capital One holds onto it.
Note that the deposit is refundable only if you pay off your balance in full and close the account. You can’t convert the secured card to an unsecured credit card, but once you improve your credit you can apply for an unsecured card and then close the secured one.
The credit line ranges from $200 to $3,000, depending on how much you put down for a your security deposit. If you want to increase your credit line, you just need to make an additional deposit.
However, the APR on this secured card is a whopping 26.99% (Variable) – you definitely don’t want to carry a balance on this card. A lower credit line may actually help you here, as you won’t be able to charge an enormous amount to the card.
You can also request a balance transfer, but you have to wait 10 days after your account has been opened to do so.
Since the Capital One® Secured Mastercard® is a Mastercard, it comes with all the regular features and benefits of a Platinum MasterCard:
- 24/7 travel and roadside assistance
- Reimbursement of the difference in price if you find a lower price for an item you purchased within 60 days
- Extended warranty protection
- Travel accident insurance and auto rental insurance
- Fraud coverage
- You can pick your due date
- 24/7 access to customer service
Lastly, and most importantly, your card usage is reported to all three major credit bureaus.
Capital One CreditWise®
The nice bonus with this card is you’ll have 100% free access to your credit score. Monitoring your score while working to increase it is very useful.
CreditWise® also has a simulator feature. If you’re thinking about taking a certain action with your card (like making a big purchase), you’ll be able to see how your credit score will be affected.
You’ll also receive free alerts whenever your TransUnion credit report changes.
If you’re unsure of how your credit score works, or what makes for a good credit score, CreditWise® will help. It grades your score and will give you tips on how to improve.
Using CreditWise® won’t impact your credit score, either.
Who’s Eligible to Apply?
According to the disclosure on Capital One’s website, you’re eligible to apply if:
- You’re located within the United States
- You have a monthly income that’s enough to cover your expenses and debt for which you’re currently responsible
- You’re at least 18 years old and have a valid Social Security number
- You have a checking or savings account (doesn’t need to be with Capital One)
- You haven’t applied for a Capital One credit card more than 3 times within the past 45 days
- You have two or more open credit card accounts with Capital One (not required, but can make you eligible)
- You have a Capital One account currently not in good standing (overdue balance, has been charged off, etc.) (not required, but can make you eligible)
- You don’t have a bankruptcy that’s still unresolved
The Application Process
As with most credit cards, the application process is simple and quick. You can apply online, and you only need to fill out your personal information. You’ll be asked for your physical address (it can’t be a P.O. Box), income, rent/mortgage amount, and employment status.
Remember that a hard inquiry against your credit will result from applying for a credit card, even a secured one.
The Fine Print
There is a $0 annual fee for this card, and late fees are up to $38. Cash advance fees are 3% of the amount of the cash advance, but not less than $10. That being said, there used to be a $29 annual fee associated with this card, so if you applied before the change in policy, you would have been charged a fee.
Capital One assures customers “there are no additional penalty fees associated with this card,” and there’s no foreign transaction fee or balance transfer fee to worry about.
It also mentions that a late payment won’t increase your APR, but the APR varies with the market, so it can fluctuate.
Finally, it states, “if your account is 180 days past due, part of a bankruptcy proceeding, or otherwise charges off, the entire balance is due immediately.”
It’s a good idea to read all of Capital One’s disclosure to educate yourself on how the card works.
Alternative Secured Cards
Not thrilled with what Capital One has to offer? There are other choices when it comes to applying for a secured card.
You can always check with your local credit union or community bank to see if it offers any secured cards. Many of our highly rated secured cards are products of these institutions.
The Savings Secured Visa Platinum Card from State Department Federal. This simple and transparent card offers low APR (13.49% Variable) and $0 annual fee. There is a minimum deposit of $250. You don’t need to be a member of the State Department nor one of the organizations tied to the credit union in order to join. You can join the American Consumer Council for only $5 to be eligible.
The Visa Classic Secured Card from Justice FCU has a $110 minimum deposit, 16.90% Variable APR and $0 annual fee. Anyone can join JFCU by first becoming a member of an eligible JFCU association like the National Sheriff’s Association, charges a $38 membership fee. It only costs $5 for eligible individuals to join JFCU, so that would raise the total cost of membership to $43.
Compare Your Options
You shouldn’t plan on carrying a balance on any credit card – even a secured card. If you can avoid doing so, the high APR of the Capital One® Secured Mastercard® isn’t a concern. It’s also a great option if you can pay the $49 or $99 minimum deposit, as opposed to $200. However, it pays to run the numbers when comparing different secured cards. Each has different benefits and fees, so make sure you choose the card that’s best for your situation.