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Live Richer Challenge: The MagnifyMoney Guide to Secured Credit Cards

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer. This site may be compensated through a credit card issuer partnership.

 

guide-to-secured-credit-cards

If you have a low credit score or no credit history, it can be difficult to get approved for a line of credit. One of the best ways to build up your credit score is to sign up for a secured credit card. Secured cards are a way to prove to a lender you can be responsible with credit.

How Secured Credit Cards Work

With a secured card, you have to put down a deposit with your own money. When you give the bank your deposit, they’ll issue you a line of credit that will most likely be equal to the amount you deposited. Sometimes, however, your secured card limit may be a bit higher than your deposit. Think of that deposit as collateral. If you stop making payments on your card, the bank will simply keep your deposit.

How Should I Use a Secured Card?

Your goal with the secured card is to demonstrate how responsible you can be. This will in turn improve your credit score. You should focus on (1) keeping your credit utilization low and (2) making full, on-time payments each month. Those two factors alone make up 60% of your credit score.

  • Use the secured card. If you don’t use the card, it won’t improve your score by much. Charge a small amount to the card each month and pay it off in full. Aim to carry a balance that is no more than 20% of your available credit limit. That keeps your utilization low and will in turn help your score.
  • Pay your balance in full each month. You can make sure you do this by signing up for automatic monthly payments. This also helps you avoid accruing interest by carrying a balance each month.
  • Sign up for a credit monitoring service such as Credit Karma, Discover’s credit scorecard, or another service that lets you check your report monthly, for free. You can also get a free annual credit report from all three bureaus at AnnualCreditReport.com.
  • Check your credit report monthly to make sure the bank is reporting your secured card behavior to the credit bureaus. If the bank doesn’t report your behavior to the bureaus, you’re missing out on the main benefit of having a secured card.
use secured card

How Long Until I See Results?

No matter what your reason for using a secured card, you should understand that the credit-building process will be slow. It may take a year or longer to lift your score by 100 points.

Choosing the Right Secured Card

The secured card you choose will ultimately depend on a personal assessment of your fiscal habits and a careful review of the card’s terms. Your best bet will be to look for a card with no annual fee, a low minimum deposit, and the lowest annual percentage rate (APR).

What to Watch Out For

The Interest Rate

Interest rates on secured credit cards tend to be much higher than standard credit card rates. So long as you pay your statement balance in full and on time every month, the interest rate doesn’t matter. Your goal with a secured card is to build your score over time with responsible behavior, so the interest rate shouldn’t matter.

The Deposit

Find out how much you have to put down to get the limit that you want. Sometimes the deposit is only a fraction of the card’s credit limit. If you get a card with a limit that is higher than your deposit, have a heart-to-heart with yourself to be certain that you can manage the limit responsibly.

You’d also want to know how long the bank will keep your deposit after you close the secured card as it might not give it back to you right away. Some banks will keep the deposit to cover any charges to the card for a couple of months after you close the account.

Fees and Charges

Like credit cards, secured cards can also come loaded with hidden fees and other charges. These can eat away at your security deposit and your card limit if you’re not careful. The Consumer Financial Protection Bureau has a great example of a credit card agreement that highlights what you should look out for. A couple of the most important items to check are if the card has an annual fee and if it has a period after which the interest rate you’re paying will increase.

Perks

Most secured credit cards don’t offer any rewards, but a few, like the Discover it® Secured – $0 Annual Fee, let you earn rewards for your purchases. You shouldn’t focus solely on the perks when choosing a card, but they are nice to have.

There are a few reasons Discover is our top recommendation. First, there is a $0 annual fee. Second, you get to see your credit score for free. And (most importantly), Discover starts automated monthly reviews of your account after 8 months to see if you can be transitioned to an account with no security deposit. Also, if you have previously filed bankruptcy, Discover will still consider your application.

MagnifyMoney Recommends

Our top three secured card recommendations are the

Discover it® Secured

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on Discover Bank’s secure website

Rates & Fees

Discover it® Secured

Annual fee
$0
Minimum Deposit
$200
Regular APR
24.49% Variable

Capital One® Secured Mastercard®

APPLY NOW Secured

on Capital One's website

Capital One® Secured Mastercard®

Annual fee
$0
Minimum Deposit
$49, $99, or $200
Regular Purchase APR
26.74% (Variable)

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
$0
Minimum Deposit
$200
Regular Purchase APR
23.99% (Variable)

Use our comparison tool to find the best secured credit cards.

Transitioning from Secured Card to Credit Card

After you demonstrate dependability by making full, consistent, on-time payments for a given amount of time — usually about a year or so — your credit score should have improved greatly.
Once you are ready to move on from the secured card, you can close your account and you will be given back your security deposit.

You’ll likely be in a position at that time to apply for a regular credit card. You can apply for a regular card with the same bank that issued your secured card, but you don’t have to.

There’s a decent chance that the bank will want to keep you as a customer and may offer to upgrade your secured card to a regular credit card. But in some cases you’ll have to ask for an upgrade.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Credit Cards

Southwest Rapid Rewards Priority Credit Card Woos Premium Customers

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer. This site may be compensated through a credit card issuer partnership.

Southwest Airlines has unveiled a new card it hopes will appeal to loyal flyers who want more oomph to the carrier’s current offerings. But overall, it’s a mixed bag when it comes to the new Southwest Rapid Rewards® Priority Credit Card.

The new card starts by offering new cardmembers a tempting new sign-up bonus: Earn up to 75,000 points. Earn 40,000 points after you spend $1,000 on purchases in the first 3 months your account is open. Plus, earn 35,000 points after you spend $5,000 on purchases in the first 6 months your account is open. But it has the highest annual fee — $149 — of Southwest’s two other personal cards. Fortunately, the potential to earn a $75 statement credit will take the edge off that fee.

If you were hoping this card would come with an upgrade on points per $1 spent than existing ones, you’re going to be disappointed. The Southwest Rapid Rewards® Priority Credit Card has the same 2 points per $1 spent on Southwest® purchases It’s surprising that there was no change, especially since competitors like American Airlines and United Airlines have upped points per $1 spent and expanded the categories that offer it.

Not only will we take a look at what the Southwest Rapid Rewards® Priority Credit Card is offering, but we’ll also compare it to two other Southwest-branded credit cards and see how it stacks up.

Southwest Rapid Rewards® Priority Credit Card Benefits

Southwest Rapid Rewards® Priority Credit Card

The information related to Southwest Rapid Rewards® Priority Credit Card has been independently collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

Southwest Rapid Rewards® Priority Credit Card

Regular Purchase APR
17.49% - 24.49% Variable
Annual fee
$149
Rewards Rate
2 points per $1 spent on Southwest® purchases
Credit required
excellent-credit
Excellent

Redeeming rewards

The Southwest Rapid Rewards® Priority Credit Card allows you to earn Rapid Rewards® at the rate of 2 points per $1 spent on Southwest® purchases

There are no blackout dates or seat restrictions, you earn unlimited points that don’t expire as long as your card account is open and there are no limits on how many points you can earn. You can redeem your rewards for flights, gift cards, merchandise, hotel stays, rental cars and exclusive experiences.

What we like

The annual fee isn’t insurmountable. Cardmembers are eligible for an annual $75 statement credit, plus you get two free checked bags, making it the only major U.S. carrier to offer this benefit. The card’s $149 annual fee is nearly covered after only one roundtrip flight, based on the baggage price of $25 for the first one and $35 for the second.

Perks upgrade*. The Southwest Rapid Rewards® Priority Credit Card now gives you an automatic $75 statement credit when you spend on the card every anniversary year. That credit can help you offset the card’s $149 annual fee. And you now get a 20% statement credit when you use the card for in-flight drinks, messaging, movies and Wi-Fi.

More bonus points*. Cardmembers can Earn up to 75,000 points. Earn 40,000 points after you spend $1,000 on purchases in the first 3 months your account is open. Plus, earn 35,000 points after you spend $5,000 on purchases in the first 6 months your account is open. The additional points is something Southwest’s other two cards don’t offer. Southwest also boosted the number of bonus anniversary points you can earn up to 7,500.

Points for elite status*. The chance to earn 1,500 tier qualifying points (TQPs) for every $10,000 you spend on the card is the same as the Southwest Rapid Rewards® Premier Credit Card. These are important, because they help you reach and maintain your Rapid Rewards A-List or A-List Preferred status on Southwest Airlines.

A-List status comes after you fly 25 one-way trips or 35,000 TQPs or A-List Preferred after 50 one-way trips or 70,000 TQPs in a calendar year. You want A-List for perks like priority check-in and dedicated security lanes (where available), along with priority boarding, a 25% points bonus, a dedicated customer service line and free same-day standby on flights. A-List Preferred status is even better, with all the perks of A-List plus a 100% points bonus and free in-flight Wi-Fi.

Good route network*. Your points are good on 100 Southwest Airlines destinations in the U.S., Mexico, Central America, and the Caribbean. But if you want to go beyond that network, Southwest Airlines’ More Rewards website lets you use your points to fly to destinations around the world.

All a-boarding*. Because Southwest Airlines has open seating on its flights, regular travelers value any chance to get higher boarding numbers to avoid the dreaded middle seat or risk being forced to check a carry-on bag. This card helps by reimbursing you when you buy up to four coveted A1-A15 boarding passes a year at the departure gate or ticket counter. That credit is worth between $30 and $50 for each flight depending on your itinerary, making this a perk worth between $120 and $200 a year.

Companion pass*. The chance to earn this popular perk — which requires you to fly 100 qualifying one-way flights or earn 125,000 qualifying points in a calendar year — remains. Once you hit the numbers, you can bring a companion along for free, minus fees and government taxes, on flights you buy or redeem with Rapid Rewards during a calendar year.

Travel and purchase protection*. This card comes with benefits like delayed/lost luggage insurance, travel accident insurance, travel and emergency assistance services, auto rental collision damage waiver, roadside dispatch, purchase protection and extended warranty, all under the Visa Signature banner.

*Terms and conditions apply.

What we don’t like

Lower points per $1 spent. Southwest Airlines had a chance to boost this in popular categories like dining, gas, groceries and a broader definition of travel — like its airline competitors have done — but it punted. The Southwest Rapid Rewards® Priority Credit Card’s rate still remains at 2 points per $1 spent on Southwest® purchases

Higher cost for international flights. While you can book international flights on Southwest’s More Rewards website, you’re only going to get a redemption rate around 1 cent per point. Booking travel on Southwest’s route network is a better value. Let’s say you wanted to fly from New York to London. It will cost you 83,275 miles on British Airways or up to 302,541 miles on United Airlines — in coach class.

Spending for points. There’s a heavy spend — $15,000 a year — to get extra bonus points. This goes along with the minimum $10,000 a year spend to get the TQPs.

Premium boarding. You can only use the four A1-A15 boarding passes on the day of travel, and there’s no guarantee that space will be available.

Check that score. You’ll need to have excellent credit to apply for this card.

Card alternatives

 Southwest Rapid Rewards® Priority Credit CardSouthwest Rapid Rewards® Premier Credit CardSouthwest Rapid Rewards® Plus Credit Card
Annual fee$149$99$69
Sign-up bonusEarn up to 75,000 points. Earn 40,000 points after you spend $1,000 on purchases in the first 3 months your account is open. Plus, earn 35,000 points after you spend $5,000 on purchases in the first 6 months your account is open.Earn up to 75,000 points. Earn 40,000 points after you spend $1,000 on purchases in the first 3 months your account is open. Plus, earn 35,000 points after you spend $5,000 on purchases in the first 6 months your account is open.Earn up to 75,000 points. Earn 40,000 points after you spend $1,000 on purchases in the first 3 months your account is open. Plus, earn 35,000 points after you spend $5,000 on purchases in the first 6 months your account is open.
Rewards2 points per $1 spent on Southwest® purchases2 points per $1 spent on Southwest® purchases and Rapid Rewards® hotel and car rental partner purchases. 1 point per $1 spent on all other purchases.2 points per $1 spent on Southwest® purchases
Foreign transaction fee$0$03% of each transaction in U.S. dollars

Both the Southwest Rapid Rewards® Premier Credit Card and the Southwest Rapid Rewards® Plus Credit Card have benefits similar to what’s offered by the Southwest Rapid Rewards® Priority Credit Card. They include the same points per $1 spent, companion pass, access to A-List and A-List Plus elite status, Transfarency and flexible domestic and international reward travel. But there are differences.

Southwest Rapid Rewards® Premier Credit Card

The information related to Southwest Rapid Rewards® Premier Credit Card has been independently collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

Southwest Rapid Rewards® Premier Credit Card

Regular Purchase APR
17.49% - 24.49% Variable
Annual fee
$99
Rewards Rate
2 points per $1 spent on Southwest® purchases and Rapid Rewards® hotel and car rental partner purchases. 1 point per $1 spent on all other purchases.
Credit required
excellent-credit

Excellent

The Southwest Rapid Rewards® Premier Credit Card starts with a similar sign-up bonus — Earn up to 75,000 points. Earn 40,000 points after you spend $1,000 on purchases in the first 3 months your account is open. Plus, earn 35,000 points after you spend $5,000 on purchases in the first 6 months your account is open. But it doesn’t come with the chance to earn 25,000 bonus miles by spending $15,000 in a calendar year like the Southwest Rapid Rewards® Priority Credit Card. You’ll pay $99 annual fee, but it’s higher once you factor in the Southwest Rapid Rewards® Priority Credit Card’s $75 statement credit, which isn’t offered with the Southwest Rapid Rewards® Premier Credit Card.

The Southwest Rapid Rewards® Premier Credit Card comes with 6,000 bonus points on an anniversary year, 1,500 fewer than what’s offered by the Southwest Rapid Rewards® Priority Credit Card.

Southwest Rapid Rewards® Plus Credit Card

The information related to Southwest Rapid Rewards® Plus Credit Card has been independently collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

Southwest Rapid Rewards® Plus Credit Card

Regular Purchase APR
17.49% - 24.49% Variable
Annual fee
$69
Rewards Rate
2 points per $1 spent on Southwest® purchases
Credit required
excellent-credit

Excellent

The Southwest Rapid Rewards® Plus Credit Card also has the same sign-up bonus as the Southwest Rapid Rewards® Priority Credit Card, also with no chance to earn the latter’s 25,000 bonus miles. The card comes with only 3,000 bonus points on an anniversary year. This card only comes with lost luggage reimbursement, baggage delay insurance, extended U.S. manufacturer’s warranty and purchase protection.

The bottom line

While the Southwest Rapid Rewards® Priority Credit Card does come with a better sign-up bonus than Southwest’s two other cards, you also have to spend more to snag it. But thanks to the new card’s yearly $75 statement credit, the Southwest Rapid Rewards® Priority Credit Card is cheaper to have in your wallet than the Southwest Rapid Rewards® Premier Credit Card.

If you combine the lower annual fee with enhanced perks on the Southwest Rapid Rewards® Priority Credit Card — the $75 statement credit, the four high boarding passes and the 20% inflight discount — it may be a good alternative to the Southwest Rapid Rewards® Premier Credit Card and the Southwest Rapid Rewards® Plus Credit Card.

But make sure you are a die-hard Southwest flyer, because you can only use them on the carrier’s Rapid Rewards website. That means you don’t get the flexibility to use your points that come with non-airline, travel-related credit cards.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Benét J. Wilson
Benét J. Wilson |

Benét J. Wilson is a writer at MagnifyMoney. You can email Benét J. at [email protected]

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Credit Cards

Discover it Cash Back Review

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer. This site may be compensated through a credit card issuer partnership.

The Discover it® Cash Back is a great $0 annual fee card that provides a quarterly rotating cashback program where you can benefit from various 5% bonus categories. You may not benefit from all the categories, but there’s a good chance at least one quarter’s categories will suit your spending. This card also has many of the perks Discover is known for, including no foreign transaction fees and no penalty APR, which add value beyond the cashback program.

Discover it® Cash Back

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on Discover Bank’s secure website

Rates & Fees

Discover it® Cash Back

Annual fee
$0
Intro Purchase APR
0% for 14 months
Regular APR
13.49% - 24.49% Variable
Rewards Rate
5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com and more up to the quarterly maximum, each time you activate, 1% unlimited cash back on all other purchases - automatically.
Credit required
good-credit
Excellent/Good

Breaking down the rewards

This card offers a cashback program where you can earn 5% cash back at different places each quarter — like gas stations, grocery stores, restaurants, Amazon.com, or wholesale clubs — up to the quarterly maximum each time you activate. You earn 1% unlimited cash back automatically on all other purchases.

The quarterly maximum is $1,500, allowing you to earn up to $75 cash back in the 5% cashback categories each quarter. Purchases exceeding $1,500 in the bonus categories earn an unlimited 1% cash back. Activation is required.

This card also comes with a new cardmember offer where Discover will match ALL the cash back you’ve earned at the end of your first year, automatically. There’s no signing up. And no limit to how much is matched. There’s no signing up. And no limit to how much is matched. So, if you earn a total of $200 cash back during your first 12 consecutive billing periods, Discover will match it and apply your cash back within the next one to two billing periods.

What are the 5% cashback categories?

  • January – March 2020 – Grocery stores, Walgreens, CVS
  • April – June 2020 – Gas Stations, Uber and Lyft, wholesale clubs
  • July – September 2020 – Restaurants and PayPal
  • October – December 2020 – Amazon.com, Target.com, and Walmart.com

What can cash back be redeemed for?

  • Statement credits
  • Direct deposits
  • Gift cards starting at $20 (with at least $5 free added to each card)
  • Purchases at Amazon.com when you pay with rewards
  • Donations to charity

How do I activate the 5% cashback categories?

There is no automatic activation — you’ll have to either manually log in to your account and activate or call 1-800-DISCOVER (1-800-347-2683). And while you may worry about forgetting to activate the 5% cashback categories, Discover makes the process a bit less stressful by providing plenty of time for you to activate. You typically can activate two months before the new 5% cashback categories start. For example, if you want to utilize the 5% cashback categories for October-December, you can activate starting August 1st. Plus, you can sign up for email alerts and push notifications via the Discover app.

Does cash back expire?

No, cash back doesn’t expire. If your account is closed or if you haven’t used it within 18 months, Discover will credit your account with any cash back remaining.

What we like about this card

The chance to pay for new purchases over time or get out of debt. If you plan on making new purchases that you can’t pay by your due date, or if you have a balance on a non-Discover card, this card provides you the opportunity to avoid interest charges. There is an intro 0% for 14 months on purchases and an intro 0% for 14 months on balance transfers. After the intro periods end, a 13.49% - 24.49% Variable APR applies. Take note: there is a 3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*, which is typical; however, there are also cards with intro $0 balance transfer fees.

No fee on your first late payment. If you miss a payment, don’t fret about incurring a late fee —  Discover waives your first late payment fee. Use this as a reminder to set up autopay or payment reminders.

No penalty APR: If you pay late, your interest rate won’t increase, unlike other cards that may charge penalty APRs near 30%. 

No foreign transaction fee. This card doesn’t charge the typical 3% fee some other cards charge on purchases made outside the U.S.

What to watch out for

13.49% - 24.49% Variable APR. While this APR range is typical of credit cards, it’s not ideal if you’re someone who carries a balance month-to-month. You can find other low interest credit cards that provide lower APR ranges and are better suited for people who carry balances.

What other cards should I consider?

Citi® Double Cash Card – 18 month BT offer

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The information related to Citi® Double Cash Card – 18 month BT offer has been independently collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

Citi® Double Cash Card – 18 month BT offer

Annual fee
$0
Intro BT APR
0% for 18 months on Balance Transfers
Balance Transfer Fee
3% of each balance transfer; $5 minimum.
Regular Purchase APR
15.49% - 25.49% (Variable)
Rewards Rate
Earn 2% cash back on purchases: 1% when you buy plus 1% as you pay.
Credit required
good-credit
Excellent/Good

The Citi® Double Cash Card – 18 month BT offer is a great flat-rate cashback card. Compared to the Discover it® Cash Back, which has quarterly rotating categories, you earn the same cashback rate on all purchases — Earn 2% cash back on purchases: 1% when you buy plus 1% as you pay. This is a straightforward way to earn cash back, and you don’t have to worry about activating bonus categories. Additional perks of this card include Citi® Private Pass®, where you can get exclusive access to various entertainment events, and Citi® Price Rewind, which conducts a 60-day search for a lower price on eligible items you register, potentially giving you the difference if a lower price is found (up to $200 back per item, and up to $1,000 per year).

Citi Simplicity® Card - No Late Fees Ever

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The information related to Citi Simplicity® Card - No Late Fees Ever has been independently collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

Citi Simplicity® Card - No Late Fees Ever

Annual fee
$0
Intro Purchase APR
0% for 12 months on Purchases
Intro BT APR
0% for 21 months on Balance Transfers
Regular Purchase APR
16.24% - 26.24% (Variable)
Balance Transfer Fee
5% of each balance transfer; $5 minimum
Credit required
good-credit
Excellent/Good

The Citi Simplicity® Card - No Late Fees Everis a good alternative to the Discover it® Cash Back if you’re looking to finance new purchases. There is an intro 0% for 12 months on Purchases, which can help you pay off purchases over time without accruing interest. After the intro period ends, a 16.24% - 26.24% (Variable) APR applies. While there are no rewards, this card has less fees than typical credit cards — there are no late fees and no penalty APR. Although this can be helpful if you forget to pay a bill, we encourage you to always make on time payments so you don’t rack up interest charges.

Bottom line

If you don’t mind activating quarterly bonus categories, the Discover it® Cash Back is a great choice for a $0 annual fee cashback card. Plus, you can benefit from the unique new cardmember intro offer in which Discover will match ALL the cash back you’ve earned at the end of your first year, automatically. There’s no signing up. And no limit to how much is matched.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Alexandria White
Alexandria White |

Alexandria White is a writer at MagnifyMoney. You can email Alexandria at [email protected]