Secured credit cards are only for people with bad credit. False! That was just one of several misconceptions surrounding secured credit cards. We promise that secured cards are not complicated. Let’s debunk seven common myths about secured credit cards.
7 Secured Credit Card Myths to Debunk
There is so much information online about secured credit cards. How do you weed out the myths? Financial products may change over time. Credit cards today differ from how they might have been 50 years ago. Along the way, secured credit cards may have picked up a few common myths. Let’s debunk them.
Table of Contents
Myth: A secured credit card is the same as a prepaid debit card.
The main difference between a secured credit card and a traditional credit card is that it requires a security deposit to act as your line of credit. As a result, many may believe that a secured credit card is the same as a prepaid debit card. After all, to use a prepaid debit card, you must preload it with funds to act as your source of currency.
However, a prepaid debit card does not affect your credit. In contrast, a secured credit card regularly reports activity to the credit bureaus. For this reason, you simply cannot build credit with a prepaid debit card but can do so with a secured card. Although, there are a few debit cards to be considered exceptions, like the Extra Debit Card. Every purchase made with Extra Debit gets you a chance to build credit at the end of each month.
Myth: You don’t need a good credit history to qualify for a secured credit card.
While it is true that many secured credit cards are easier to qualify for than traditional ones, an application may still require a credit check. Often times, secured credit cards have no credit checks. Card issuers may instead use other points for qualification, like income or your ability to make the minimum security deposit. However, some card issuers may still opt to check your credit history to make a decision.
Myth: Secured credit cards have high interest rates.
This myth is not entirely false. Some secured credit cards may have high interest rates, but not all do. Interest rates vary by card issuer. For example, you may find credit union-issued secured cards have a lower interest rate than a traditional credit card from a larger bank. For instance, the SchoolsFirst FCU Share Secured Mastercard® Credit Card is a California-based credit union that offers a low purchase APR. Alternatively, you may encounter secured credit cards with similar rates to traditional cards, like the OpenSky® Plus Secured Visa® Credit Card or the First Latitude Platinum Mastercard® Secured Credit Card.
First Latitude Platinum Mastercard® Secured Credit Card
First Latitude Platinum Mastercard® Secured Credit Card
First Latitude Platinum Mastercard® Secured Credit Card
- 24.49% (Variable) Regular Purchase APR
- 29.49% (Variable) Cash Advance APR
At a Glance
The First Latitude Platinum Mastercard is a secured credit card from Synovus Bank and First Progress. The card can help you build a positive credit history with financial responsibility and regular payments, all for a $25 annual fee.
- Best Benefits
- Rates & Fees
- Why Should You Apply?
- 1% Cash Back Rewards on payments • Choose your own fully-refundable credit line - $100 to $2000 – based on your security deposit • Build your credit score.¹ Reports to all 3 credit bureaus • No minimum credit score required for approval! • ¹Cardholders who keep their balance low and pay their credit card bill on time every month typically do see an increase in their credit score. • *See Important Disclosures for complete offer details
- Regular Purchase APR: 24.49% (Variable)
- Cash Advance APR: 29.49% (Variable)
- Cash Advance Transaction Fee: Either $10 or 3% of the amount of each cash advance, whichever is greater
- Annual Fee: $25 for the first year, after that $35 annually
- Foreign Transaction Fee: 3% of the transaction amount in U.S. dollars
- Late Payment Penalty Fee: Up to $41
- Return Payment Penalty Fee: Up to $30
- Minimum Deposit Required: $100
- You have little-to-no credit history and struggle to get approved for other credit cards
- You want to establish a credit history or improve your credit score
- You can submit a minimum of $100 for the security deposit
- You don’t intend to carry a balance from month-to-month
OpenSky® Plus Secured Visa® Credit Card
OpenSky® Plus Secured Visa® Credit Card
OpenSky® Plus Secured Visa® Credit Card
- 29.99% (Variable) Regular Purchase APR
- 29.99% (Variable) Cash Advance APR
At a Glance
Building credit without hidden fees is a breeze with the OpenSky® Plus Secured Visa® Credit Card. You can build credit, graduate to unsecured credit, and boost your financial knowledge base while paying $0 in annual fees.
- Best Benefits
- Rates & Fees
- Why Should You Apply?
- Limited Time Offer: $200 minimum refundable security deposit. Click “Apply Now” to see additional terms and conditions.
- No annual fee
- No credit check to apply. Find out instantly if you are approved- Zero credit risk to apply!
- Looking to build or rebuild your credit? 2/3 of cardholders receive a 48+ point improvement after making 3 on-time payments
- Get considered for an unsecured credit line increase after 6 months - no additional deposit
- Monitor your credit progress with free access to your FICO Credit Score.
- Reports to all 3 major credit bureaus monthly to establish and build credit history.
- Add to your mobile wallet and make purchases using Apple Pay, Samsung Pay and Google Pay
- Secure your credit line with a refundable security deposit - as low as $300.
- Easy application, apply in less than 5 minutes right from your mobile device
- Offer flexible payment due dates which allow you to choose any available due date that fits your payment schedule
- Now you can make smaller partial payments towards funding your security deposit over 60 days
- Over 1.2 Million Cardholders Have Used OpenSky Secured Credit Card To Improve Their Credit
- Regular Purchase APR: 29.99% (Variable)
- Cash Advance APR: 29.99% (Variable)
- Cash Advance Transaction Fee: Either $10 or 3% of the amount of each cash advance, whichever is greater
- Annual Fee: $0
- Foreign Transaction Fee: 3% of the transaction amount in U.S. dollars
- Late Payment Penalty Fee: Up to $40
- Return Payment Penalty Fee: Up to $40
- Minimum Deposit Required: $300
- You want a secured credit card but don't want to pay an annual fee
- You have at least $300 available for a security deposit (up to $3,000)
- You are serious about building credit and plan to pay on-time each month
- You want to graduate to unsecured credit
SchoolsFirst FCU Share Secured Mastercard® Credit Card
SchoolsFirst FCU Share Secured Mastercard® Credit Card
SchoolsFirst FCU Share Secured Mastercard® Credit Card
- 13.90% Regular Purchase APR
- 13.90% Balance Transfer APR
- 13.90% Cash Advance APR
At a Glance
The SchoolsFirst FCU Share-Secured Mastercard® Credit Card is a decent secured card that struggles due to its high refundable deposit requirements.
- Best Benefits
- Rates & Fees
- Why Should You Apply?
- Establish or re-establish your credit history with this secured credit card
- Get a credit limit with a deposit between $500 and $5,000
- Get Mastercard Enhanced ID Theft Protection to monitor your identity
- Compatible with Apple Pay
- Regular Purchase APR: 13.90%
- Balance Transfer APR: 13.90%
- Cash Advance APR: 13.90%
- Penalty APR: 17.40%
- Foreign Transaction Fee: 2% of the transaction amount in U.S. dollars
- Late Payment Penalty Fee: $25
- Return Payment Penalty Fee: $20
- Minimum Deposit Required: $500
- You want to rebuild a bad credit score
- You're new to credit
- You can afford to part with at least $500 while your account is open
- You do't want to pay an annual fee
Myth: You shouldn’t use a secured credit card for everyday purchases.
It’s just absolutely not true! If anything, we would encourage you to use your secured credit cards (responsibly) for your everyday purchases if you’re on the path to building better credit. With secured credit cards, you can use them anywhere the payment network is accepted. Similar to traditional credit cards, you can use your secured credit card at grocery stores, at the gas pump, online, and more.
You can also find creative ways to use a secured credit card to help budget your monthly essential purchases. Set a deposit amount that compliments your budget to use your card for those monthly non-negotiables, like groceries, prescriptions, and utility bills. Use your card responsibly and always be mindful of your credit utilization ratio to maintain healthy credit reporting.
Myth: You can only get your security deposit back if you close the account.
While the deposit for your secured card works as collateral and is typically returned only when the account is closed, some credit cards offer an alternative option. There are secured cards that can graduate you to an unsecured line of credit after a few months of responsible use, like the Self Visa® Credit Card or the Merrick Bank Secured Credit Card. Card issuers that offer graduation to an unsecured credit card will review your credit standing anywhere between three months to one year. The offer might consist of a credit line increase without any additional deposit.
Merrick Bank Secured Credit Card
Merrick Bank Secured Credit Card
Merrick Bank Secured Credit Card
- 22.70% Variable Regular Purchase APR
- 27.70% Variable Cash Advance APR
At a Glance
The Merrick Bank Secured Credit Card is an effective tool for boosting your credit score. The card features a very competitive APR on purchases, a modest annual fee of $36, and the chance at credit limit increases – without the need for any additional cash deposits.
- Best Benefits
- Rates & Fees
- Why Should You Apply?
- Choose your own credit line based on how much money you want to put down as a security deposit
- Initial deposits can be from $200 to $3,000. You can increase your credit line at any time by adding additional money to your security deposit, up to $3,000
- After 9 months, we review your account for a credit line increase. No additional deposit required!
- Secured Credit Cards are great for people looking to build or rebuild credit and are available to people with all kinds of credit backgrounds
- Unlike a debit card or a pre-paid card, it helps build your credit history. We report your payment history to all three major credit-reporting agencies
- Get your FICO® Credit Score for free each month
- Fraud coverage if your card is lost or stolen. Access your account 24 hours a day, 7 days a week. Get help staying on track with available Auto Pay and account alerts
- Card issued by Merrick Bank, Member FDIC
- Regular Purchase APR: 22.70% Variable
- Cash Advance APR: 27.70% Variable
- Cash Advance Transaction Fee: Either $10 or 4% of the amount of each cash advance, whichever is greater
- Annual Fee: $36 for first year. Billed $3 per month thereafter
- Foreign Transaction Fee: 2% of the transaction amount in U.S. dollars
- Late Payment Penalty Fee: Up to $40
- Return Payment Penalty Fee: Up to $40
- Minimum Deposit Required: $200
- You're looking to establish credit for the first time
- You have credit problems and need to bounce back with a secured card
- You want the chance of additional credit lines with an extra deposit
Self Visa® Credit Card
Self Visa® Credit Card
Self Visa® Credit Card
- 29.24% (Variable) Regular Purchase APR
At a Glance
The Self Visa® Credit Card is a secured credit card that pairs with an existing Self Credit Builder Account. The card has no formal approval process. Instead, hopeful consumers simply need to open a Self account and save over $100 to fund the secured Visa account.
- Best Benefits
- Rates & Fees
- Why Should You Apply?
- Make at least 3 monthly payments on time, have $100 or more in savings progress in your Credit Builder Account, and be in good standing. Then, you’ll be eligible for the Self Visa Credit Card*, without a hard credit check
- Build credit and savings at the same time
- Start with a Credit Builder Account* that reports monthly payments to all 3 major credit bureaus
- At the end of your plan, unlock the savings you built — minus interest and fees
- The Self Visa® Credit Card* is accepted at millions of locations in the U.S.
- *All Credit Builder Accounts made by Lead Bank, Member FDIC, Equal Housing Lender, Sunrise Banks, N.A. Member FDIC, Equal Housing Lender or SouthState Bank, N.A. Member FDIC, Equal Housing Lender. Subject to ID Verification. Individual borrowers must be a U.S. citizen or permanent resident and at least 18 years old. Valid bank account and Social Security Number are required. All loans are subject to consumer report review and approval. All Certificates of Deposit (CD) are deposited in Lead Bank, Member FDIC, Sunrise Banks, N.A., Member FDIC or SouthState Bank, N.A., Member FDIC. The Self Visa® Credit Card is issued by Lead Bank, Member FDIC, Equal Housing Lender or SouthState Bank, N.A., Member FDIC, Equal Housing Lender. Individual results will vary. Visit self.inc for more details.
- Regular Purchase APR: 29.24% (Variable)
- Annual Fee: $25
- Late Payment Penalty Fee: Up to $15
- Return Payment Penalty Fee: Up to $15
- You're serious about raising your credit score
- You already have a Self Credit Builder Account
- You don’t mind the card's $25 annual fee
- You plan to pay your card balance in full every month
Myth: Secured credit cards are only for people with bad credit.
A secured credit card can be a favorable tool if you have bad credit and find it challenging to qualify for an unsecured card. However, its uses go beyond access to credit for subprime scores. Secured credit cards can aid anyone beginning their credit journey without any credit history. In other words, secured credit cards can build and rebuild credit when used responsibly.
Myth: Secured credit cards are a quick fix for bad credit.
A secured card can indeed help rebuild credit, but it doesn’t happen overnight. The timeframe for rebuilding credit depends on your credit report’s unique status. With responsible use of a credit card, you can help improve your credit score, but you have to consider any other revolving credits you may have, like auto loans or mortgages. In addition, seeing any major improvement in your credit score can take up to a year. And in most cases, witnessing improved credit scores in its prime can take years.
Bottom Line
Debunking secured credit card myths can help clear up some common misunderstandings. Hopefully, you have learned a few things that can help you choose whether or not a secured credit card is right for you. You have much to consider, like deciding if you want a secured card with graduating potential or if you should go the credit union route to opt for the lowest rate secured cards you can find. Lastly, building credit is a slow progression and worth the wait.
Related Article: The Ultimate Guide To Secured Credit Cards
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