Snapshot: TheSecured Chime Credit Builder Visa® Credit Card1 doesn’t have interest4 or an annual fee, which makes it a great credit-building2 option. You’ll have to open a Chime checking account and receive a qualifying direct deposit in order to apply.
Pros
Cons
No annual fee.
You can’t apply without a Chime checking account.
No interest4
You have to secure your credit limit with a deposit.
Chime reports to all three credit bureaus.
Chime doesn’t report credit utilization.
You can use your deposit to pay down your charges at the end of the month and move more money from your checking account to the secured account to secure future credit
Secured Chime Credit Builder Visa® Credit Card
Qualifying direct deposit of $200 or more. Chime Checking Account required.
No annual fee. No minimum security deposit*. No credit check to apply
*Money added to Credit Builder will be held in a secured account as collateral for your Credit Builder Visa card, which means you can spend up to this amount on your card. This is money you can use to pay off your charges at the end of every month.
Build credit history with your own money on everyday purchases and on-time payments**
**On-time payment history may have a positive impact on your credit score. Late payment may negatively impact your credit score. Results may vary.
View and track your FICO® Score¹ right in the Chime app. FICO® Scores are used by 90% of top lenders
¹Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. Learn More
***$2.50 Out-of-network ATM withdrawal fees may apply.
Chime is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. The Chime Credit Builder Visa® Credit Card is issued by Stride Bank, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted.
Table of Contents
Full Review of Secured Chime Credit Builder Visa® Credit Card
What You’ll Like About This Card
The Drawbacks
Is the Secured Chime Credit Builder Visa® Credit Card Worth It?
Full Review of Secured Chime Credit Builder Visa Credit Card
The Secured Chime Credit Builder Visa® Credit Card is unique among secured credit cards. Most secured credit cards require an initial qualifying deposit that acts as collateral and determines your credit limit. The Secured Chime Credit Builder Visa® Credit Card works a little differently. By transferring funds from your Chime checking account to your secured account, you determine your own credit limit.
This means that you don’t have to worry about accruing credit card debt faster than you can pay it back. You’re essentially “borrowing” from the deposit that you initially submitted to set up the account, except that it appears on your credit reports as a credit account. This means that all on-time payments you make on this card will show up as positive items on your reports, helping you build up good credit.
Also, a credit check isn’t necessary to apply – which makes it a good option if you have a low or non-existent credit score.
To apply for the Secured Chime Credit Builder Visa® Credit Card, you will need to open a Chime checking account and receive a qualifying direct deposit of at least $200. So although the Secured Chime Credit Builder Visa® Credit Card has no security deposit minimum3, with the requirement for the Chime checking account, it’s essentially a $200 minimum requirement to get the secured card.
At the end of the day though, a $200 minimum deposit is right in line with other secured cards. And the lack of interest rate4, annual fee, and credit limit flexibility available with this card make it a great choice if you’re looking to build your credit.
What You’ll Like About This Card
No Minimum Security Deposit3 and an Adjustable Credit Limit
The money that you use as a security deposit for your Secured Chime Credit Builder Visa® Credit Card is transferred from your Chime Checking Account to your Credit Builder secured account. So even though you need to have a qualifying direct deposit of at least $200 in your Chime checking account in the last year to get the card, you don’t have to transfer the full $200 to your Credit Builder secured account – you can transfer however little you want.
One of the most unique features of the Secured Chime Credit Builder Visa® Credit Card is that there is no minimum security deposit3. You can also change your credit limit later if you decide to add more money into the Credit Builder secured account, which provides a lot of flexibility. You can start working to build your credit history right away. (There is a maximum deposit limit of $10,000 though).
No Interest Rates4 or Annual Fees
With Chime, you essentially get a checking account as well as a secured, credit building card. The benefit is that you get these things for free – no interest rates, no annual fees.
User-Friendly App
You can easily manage your Secured Chime Credit Builder Visa® Credit Card and your Chime checking account from the Chime app, including moving money from your spending account to your Credit Builder secured account.
Great for Building Credit2
There are two aspects of this card that make it a great option for building credit:
Because you’re spending your own money and Chime doesn’t have any interest rates, you don’t have to worry about racking up credit card debt. You can spend to your credit limit without any worries (although you will need to continue to make on-time payments).
Chime doesn’t report your credit utilization ratio to the credit bureaus (the ratio of available credit to used credit). Typically, with credit it’s a good practice to keep your credit utilization ratio below 30%. But with the Secured Chime Credit Builder Visa® Credit Card, you don’t have to worry about that.
The Drawbacks
You Need a Chime Checking Account
While you don’t need great credit to get this card, you do need a Chime checking account. You also have to continue to transfer money over to your secured account to secure future credit if you use your deposit to pay down your charges each month.
No Upgrade Path
Many secured credit cards offer an upgrade path after a period of “good behavior” where you’ve shown that you can make payments on-time and can be trusted with a line of credit. Typically, this is a great option if you’ve been struggling with a low credit score for a long time and are looking to work your way up to a larger line of credit.
Is the Secured Chime Credit Builder Visa® Credit Card Worth It?
Our opinion? Absolutely. Why? No interest4, no annual fees and total flexibility.
If you’ve never had a credit card before (maybe you’re a young adult or a college student) and you’re looking to build credit and avoid high interest rates while learning about how to manage a credit card, this is a great option. It can also be a tool to help those who’ve had significant negative credit items in their past, like bankruptcies, rebuild their credit.
It all depends on what you’re looking for. If you’re looking to rebuild and protect your credit, this card is a great option. If you have a low credit score and are looking for an access point to a larger line of credit, you may want to consider other secured credit cards.
What are the credit limits for Secured Chime Credit Builder Visa® Credit Card?
The Chime credit card doesn’t come with “traditional” credit limits. You can spend as much as you secure with a deposit of funds from your Chime checking account to the secured account. You need to receive a qualifying direct deposit of at least $200 in your Chime checking account in the last year before you can qualify and apply for a Secured Chime Credit Builder Visa® Credit Card.
How soon can I increase my credit limit after being approved for a Secured Chime Credit Builder Visa® Credit Card?
You can increase your own credit limit at any time, depending on how much money you transfer from your Chime checking account to your Chime Builder secured account. The maximum limit you can have on the card is $10,000. There is no upgrade path to a typical “unsecured” line of credit though.
Is a Secured Chime Credit Builder Visa Credit Card good for building credit?
Yes! The Secured Chime Credit Builder Visa Credit Card offers two main benefits for building credit. First, Chime does report your positive payment history to all three of the credit bureaus. Second, it doesn’t report credit utilization. That means you can use your credit amount as you want without worrying about what percentage of the credit limit you’ve used.
To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Chime Checking Account. The qualifying direct deposit must be from your employer, payroll provider, gig economy payer, or benefits payer by Automated Clearing House (ACH) deposit OR Original Credit Transaction (OCT). Bank ACH transfers, Pay Anyone transfers, verification or trial deposits from financial institutions, peer to peer transfers from services such as PayPal, Cash App, or Venmo, mobile check deposits, cash loads or deposits, one-time direct deposits, such as tax refunds and other similar transactions, and any deposit to which Chime deems to not be a qualifying direct deposit are not qualifying direct deposits.
On-time payment history may have a positive impact on your credit score. Late payment may negatively impact your credit score. Chime will report your activities to Transunion®, Experian®, and Equifax®. Impact on your credit may vary, as Credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.
Money added to Credit Builder will be held in a secured account as collateral for your Credit Builder Visa card, which means you can spend up to this amount on your card. This is money you can use to pay off your charges at the end of every month.
Out of network ATM withdrawal fees may apply. See here for details.
Advertiser Disclosure: Credit.com has partnered with CardRatings for our coverage of credit card products. Credit.com and CardRatings may receive a commission from card issuers.
Editorial Disclosure:Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.
Snapshot: You can secure a small credit limit with a deposit ($200 minimum) and don’t need great credit to get approved for this card. You also earn 1.5% cash back on your purchases without paying an annual fee, making it a good option for those looking to rebuild their credit.
Basic Features
Ongoing APR: reg_apr,reg_apr_type depending on creditworthiness
Annual fee: annual_fees
Credit needed: Scores in the credit_score_needed range
Additional Details
1.5% cash back on every purchase
Possible upgrade to a typical unsecured Quicksilver card
Possible credit line increase after 6 months
Minimum deposit of $200 required
Fast review process – find out if you’ve been approved within minutes
Ready to learn how to apply?
Full Review of Capital One Quicksilver Secured Cash Rewards Credit Card
What You’ll Like About this Card
The Drawbacks
Is It Worth It?
FAQ
Full Review of Capital One Quicksilver Secured Cash Rewards Credit Card
As far as secured credit cards go, there are so many reasons to love this one. When evaluating secured credit cards, most of the time you want to consider the following features:
Does it have an upgrade path? (Can I use a history of on-time payments with this card to qualify for another credit card later on?)
Does it have an annual fee?
Does it report to all three credit bureaus?
As far as the Capital One Quicksilver Secured Cash Rewards Credit Card goes, it combines the best features of a secured credit card – upgrade path, no annual fee, credit reporting for building credit – with the added benefit of 1.5% cash back on all purchases. cash back rewards that you can redeem as a statement credit, apply to recent purchases, gift cards, or in other ways (Capital One has a lot of flexibility about how you can redeem your cash back).
Provided you pay off your statement balance every month to avoid interest, you can earn a decent amount of extra cash throughout the year. And with a consistent cash back rate on all purchases, you don’t have to game the system to maximize your rewards.
credit bureaus.
If you’re looking for a cash back rewards card, but are worried about being approved for a typical “unsecured” card, no worries – a secured card is the right path for you. You only need fair credit to possibly be approved for this card, which makes it good for building or rebuilding your credit.
Ready to start earning cash back on your purchases?
The Drawbacks
You Have to Pay a Deposit
To successfully apply for and open this card, you’ll have to come up with a deposit that secures your credit limit. That means you need to have a little cash set aside to start building credit with this card. Luckily, deposits start as low as $200.
credit score and your ability to make payments. Your income may be a factor in determining your credit limit.
How Soon Can I Increase My Credit Limit After Being Approved for a Capital One Quicksilver Secured Cash Rewards Credit Card?
You typically have to demonstrate strong account management and pay your bills on time for at least 6 months before you can request a credit increase or receive offers for an upgraded card.
How Good is a Capital One Quicksilver Secured Cash Rewards Credit Card for Building Credit?
This is an excellent card for building credit (it was designed for that purpose). However, you do have to keep up your end by using your card responsibly and making on-time payments every billing cycle. Even though this is a secured credit card, it’s still possible to rack up debt and hurt your credit if you don’t pay your statements.
Ready to start earning cash back on your purchases?
Advertiser Disclosure: Credit.com has partnered with CardRatings for our coverage of credit card products. Credit.com and CardRatings may receive a commission from card issuers.
You’ve probably used Venmo a lot this past year, but is Venmo safe? And if so, what are the advantages of Venmo over other online payment providers? Read answers to these questions and more in our helpful guide below.
In This Piece
What Is Venmo?
Venmo is a type of peer-to-peer—or person-to-person—payment app. Its parent company is money-moving giant PayPal, which had over 377 million registered users in the last quarter of 2020. Think of Venmo like “PayPal lite”—you can receive cash and send money to people, but you can’t send invoices or do anything complex.
PayPal launched Venmo for one reason—to compete in the P2P payment marketplace. Not everyone needs PayPal’s full suite of services, but they appreciate a convenient way to split the bill. You can pay for part of a dinner or your share of the shopping with Venmo, and some online retailers also accept Venmo as a form of payment.
Venmo began offering a cash back rewards debit card—the Venmo Debit Card—in 2018. In late 2020, it launched the Venmo Credit Card. Like the Venmo Debit Card, the Venmo Credit card offers cash back—up to 3% on your “top spend” category.
How Does Venmo Work?
Venmo works a little like PayPal. To use the services you simply:
I just watched a documentary on the dark web, and I will never feel safe using my credit card again!
Luckily I don’t have to worry about that. I have ExtraCredit, so I get $1,000,000 ID protection and dark web scans.
I need that peace of mind in my life. What else do you get with ExtraCredit?
It’s basically everything my credit needs. I get 28 FICO® scores, rent and utility reporting, cash rewards and even a discount to one of the leaders in credit repair.
It’s settled; I’m getting ExtraCredit tonight. Totally unrelated, but any suggestions for my new fear of sharks? I watched that documentary too.
…we live in Oklahoma.
Download and install the app on your phone
Link the app to your bank account, debit card, or credit card
Begin sending payments to friends, family members, and select online retailers
Venmo has an initial $299.99 weekly sending and receiving limit. To lift that limit, you need to provide identification documents. Once your ID is confirmed, you’ll have a $4,999.99 weekly limit.
If you want a Venmo Debit Card, you’ll need to apply online. To get a Venmo Credit Card, you need to be over 18 and a U.S. resident—and you also need to have had your Venmo account for at least 30 days.
Is Venmo Safe? What Are the Risks of Using Venmo?
Venmo is generally very safe—the company uses bank-level encryption to keep your data safe. You can add a PIN number and enable multi-factor authentication (MFA) to make your account even more secure. A strong password combined with a PIN and MFA greatly reduces the chance of hacking.
Venmo’s default profile and payment settings are public. Thankfully, you can change your privacy settings to keep your payment settings under wraps. Venmo’s three privacy levels are:
Anyone can find you and see your transactions.
Only you and the person you send payment to will see a transaction.
Friends only. Your Venmo friends can see you and can also see your transactions.
You can set your privacy settings to default to any of these three levels, or you can set levels on a transaction-by-transaction basis. You can also hide your past transactions.
Is Venmo Free?
Depending on how you use Venmo, it can be 100% free. Believe it or not, if you’re strictly using Venmo to transfer payments from one party to another and you’re not using a credit card, you may be able to use it for free.
However, there are some instances where Venmo does charge a fee. For example, if you’re using Venmo as part of your business, you’ll likely need to pay merchant fees. Here’s a look at the various fees Venmo charges account holders.
Instant Transfer Fees
You can transfer money from your Venmo account to your bank account at any time. This process can take 1-2 days to complete. If you need the money faster, you can opt for the instant transfer option, but it will cost you. Venmo charges an instant transfer fee of 1.75%, with a minimum fee of $0.25 and a maximum fee of $25.
Processing Fees
If you choose to make a Venmo payment using your bank account or debit card, you’ll incur no additional fee. If, on the other hand, you use a credit card to make this payment, you must pay processing fees. Venmo’s processing fees are 3%.
Check Deposit Fees
Venmo allows account holders to deposit checks directly into their Venmo account. However, it charges a fee for this service. The check deposit fee is 1% or a $5 minimum when depositing government-issued or payroll checks and 5% or a $5 minimum when depositing all other checks.
Merchant Fees
If you’re using Venmo to accept payments for a business you operate, you must pay merchant fees. Venmo charges business owners a 1.9% merchant fee plus an additional $0.10 per transaction.
What Is Venmo Debit Card and How Does It Work?
If you use your Venmo account quite often or have your payroll or government check deposited into your Venmo account, you might want to consider applying for a debit card with Venmo. This card is similar to any other debit card from a financial institution. It lets you spend the money in your Venmo account anywhere that accepts debit cards.
You can track your deposits and payments directly on the Venmo app, and you can also check the balance in your account. Since this is a debit card, it doesn’t have the same strict credit requirements you might run into when attempting to obtain a credit card. Obtaining this type of debit card can avoid the need to transfer funds from your Venmo account to your bank account.
There can be some fees associated with having a Venmo debit card. For instance, you incur a $2.50 fee when you withdraw funds from your Venmo account via an out-of-network ATM. There’s no fee for using an in-network MoneyPass ATM. A $3 fee applies for an over-the-counter cash withdrawal at a bank. Additionally, you can only withdraw up to $400 per day from your Venmo account.
Venmo and Taxes
If you’re only using Venmo to transfer funds to friends and family members, taxes won’t be an issue. If, on the other hand, you’re using Venmo to collect payments for your business, you may be responsible for paying taxes. If you earn over a certain amount during the year, you need to include any Venmo payments you received for your business on your taxes. Before starting any business, it’s important to understand what your tax responsibilities are.
Venmo Scams to Watch Out for
If you’re wondering “Is Venmo safe to use?” the answer is yes, it’s relatively safe to use. Venmo uses encryption security to protect your personal information from hackers. Its robust security features are in place to keep your money safe.
Even these robust security features can’t stop all scammers. But there are steps you can take to avoid this type of bank account fraud. It’s important to recognize these scams before scammers take advantage of you. Below is a look at the most common Venmo scams.
Fake Products for Sale
One of the most common Venmo scams involves online sales. The scammer pretends to be selling something online. However, once you make a payment, you never receive the product.
Once a Venmo payment is processed, you can’t reverse it and there’s no way to get your money back. This is why it’s so important to only submit payments to people and businesses you know and trust.
Pretending to Be from Venmo
Another common scam involves scammers pretending to be Venmo. If you receive an email or text message claiming to be from Venmo, don’t automatically assume it is. Some scammers send these messages to try to steal your personal information, such as your account number and password. Once they have this information, they can hack into your account and make payments without your permission.
Using Your Phone
There have been reports of strangers asking a person to borrow their phone. Instead, they actually open the Venmo account on your phone to send money to an account associated with them. Unfortunately, trying to do a good deed by letting someone borrow your phone could cost you hundreds or thousands of dollars.
Why Does Venmo Require Identify Verification?
If you open an account with Venmo, you’ll have to prove your identity. This isn’t just a Venmo requirement. According to the Consumer Identification Program under the U.S. Patriot Act, all financial institutions must verify the identities of all their customers.
This program helps prevent terrorists from sending and receiving money and helps to stop money laundering. It can also help reduce the risk of fraud on Venmo. However, even identity verification can’t prevent all forms of fraud. It’s important to always remain vigilant and report any suspicious activity to Venmo.
Staying Safe with Venmo
There are several things you can do to protect yourself when using Venmo.
Monitoring Your Account
Be sure to periodically check your Venmo account for unauthorized transactions. If you notice any, report it to Venmo immediately.
Set Up Venmo Notifications
Receiving notifications as soon as there’s suspicious activity on your Venmo account may help prevent a scammer from accessing your account. Always be sure to have your notifications on for Venmo.
Secure Your Account
There are multiple ways to secure your Venmo account if you lose your phone or allow someone to use it. First, turn on the PIN feature. This step requires you to enter a specific PIN number before you can even open your Venmo account. You should also set up the two-function authentication feature to make it even more difficult for someone to hack into your account.
Choose Private Setting
You may not realize it, but Venmo automatically makes all accounts public. While other users can’t see the specific details of your account, they can see how often you use Venmo. To keep your account safe, it’s recommended to switch your account to private so only your friends and family members can see your information.
Don’t Keep a High Balance
It’s recommended to avoid keeping a high balance in your Venmo account. This way, if your account is hacked, you’re not at risk of losing too much money. Instead, take steps to transfer your Venmo balance to your bank account as soon as possible.
Don’t Share Phone
Even if you’re using the passcode and two-factor authentication features, it’s recommended not to let a stranger use your phone. Only those you know and trust should have access to your phone.
Only Enter Venmo Through the App or Website
Don’t activate your Venmo account through a link you receive in an email or text message. This could be a phishing email designed to steal your Venmo account information, such as your account number and password. Instead, only access your Venmo account through the Venmo app or website.
Venmo Alternatives
Venmo isn’t alone in the payment marketplace. Like most other payment options, it has a long list of rivals. Let’s line up three formidable adversaries for comparison.
Tip: PayPal is another popular payment app. Check out our safety review for more information.
App Name
Venmo
Zelle
Cash App
Parent company
PayPal
Early Warning Services
Square
Need a bank account?
No
Yes—but you can still use and download the app if your bank doesn’t offer Zelle
No
Who can you pay?
Friends, family members and other people you trust
Friends, family members and other people you trust
Anyone, including contractors, utility companies and charities
Debit card available?
Yes
No
Yes
Can you hold a balance?
Yes
No—but Zelle is connected to your bank account by default
Yes
How much does it cost?
Free if you use a bank account, a debit card or your Venmo balance. If you use a credit card, Venmo charges a 3% fee. Instant outgoing bank transfers cost 1%, while standard bank transfers are free.
No fees to send or receive money. Your connected bank may charge fees, however.
Free if you use a bank account, a debit card or your Cash App balance. If you use a credit card, Cash App charges a 3% fee. Instant outgoing bank transfers cost 1.5%, while standard bank transfers are free.
Any limits?
You’ll have a $299.99 weekly peer-to-peer limit immediately after signup. If you confirm your identity, your weekly limit will go up to $4,999.99.
Limits depend on the financial institution. If your bank doesn’t offer Zelle, your weekly transaction limit will be $500.
You can send or receive up to $1,000 during a period of 30 days.
Venmo Versus Credit Cards
What if you don’t want to pay via an app, and you don’t like carrying cash around either? In that case, your best bet might be a credit card. You’ll need to ask your waiter or your cashier to split the bill, but most merchants are happy to oblige.
Look for credit cards with the following perks:
A low APR. Choose a low-interest credit card to save money on interest payments.
Cash back rewards. Why go for a standard credit card when you can get a little money back each time you shop?
Balance transfer offers. Transferring your balance from another credit card? In that case, look for a 0% balance transfer offer.
Credit builder cards. If you don’t qualify for an unsecured credit card, go for a secured card or a credit builder card to boost your credit score.
So is Venmo Safe?
Let’s recap. Venmo is a P2P payment app, and its parent company is PayPal. You can send money to friends, family members and other trusted individuals via Venmo. Some online stores accept the payment method, too. Venmo offers a debit card and—if you qualify—a credit card. You can fund your account with your bank account, a credit card or a debit card.
If you prefer not to pay by app and you don’t feel safe carrying cash, you might want to go with a credit card. Looking for the right credit card for you? Check out ExtraCredit® today. You’ll see select personalized credit offers when you visit your Reward It portal.
Disclaimer: The views and opinions expressed in this article are those of the author only and are not endorsed by Credit.com.
When a consumer wants to start building credit, a logical step to take is to get a credit card. However, credit card issuers want to check your credit and payment history before they approve you for a card. Now, if you’re just starting out with credit, you have no credit history to show for, and are often not eligible for credit cards with higher credit limits and rewards.
How do you then get out of this helpless circle? One option is getting a store card. Store cards are often easy to get approved for, even without having previous credit history. And they can help you get into the credit world, at least for starters.
What Is a Store Card?
Store cards are credit cards made by specific stores or brands, for instance; Costco, Walmart, Amazon, etc. These cards are made to be used for purchases at the store. Store cards often offer perks at the store such as bonus points, in-store discounts, and more.
There are store cards that act as credit cards and can be used in any other store on all purchases, besides the specific store. However, the card benefits will usually be specifically at the store. Compare different credit card offers to see which one works best for you.
How a Store Card Can Help You Build Credit-Easy Approval
Store cards are often thought of as beginner cards. They’re often easy to get approved for, even for someone completely new to credit.
That’s how a store card can help you jump-start your credit journey. If you have zero credit, regular credit cards may not approve you for credit cards because they want to see your payment history first. But store cards may have higher approval odds. Carefully consider one in your credit-building journey.
Downside of a Store Card
Though a store card is easy to get approved for, you most likely won’t get approved for a high credit limit. You can get approved for a limit of as low as a couple hundred dollars with a store card. In addition, the APR will usually be very high on store cards.
Store Cards and Your Credit Score
If you’re a beginner to credit and want to build your credit using a store card, here’s how.
Research store cards that report to at least one credit bureau.
Apply for a store card and if approved, use it to. Simply build your credit history by using and paying the card payments. By doing so, you work toward establishing a positive payment history to help get other credit card types later.
After some time of being with a store card, a good idea is to see how your credit score has been affected. Then you can see if applying for a credit card that is a step up to the next level of building more credit history. See some cards that are geared toward building credit history here.
To sum it up, store cards are great for breaking into credit. After some time, you may become eligible for cards that can help you keep building and establishing your credit. From there, to the premium cards you go!
Store Card Pros and Cons
Store cards have their pros and cons.
Pros
Cons
Easier to get approved for
It’s not considered a real credit card according to FICO
Helps you start building credit
Higher interest rates
Store perks and benefits
Can sometimes only be used at the store/brand
Low credit limits
Alternatives for Building Credit
Building your credit is not limited to getting a store card. There are alternative ways to go about building your credit.
Secured Cards
Secured cards work a little differently than regular credit cards. With a secured card, the card issuer requests a deposit from you, a set amount of money which they hold as collateral in case you fail to make payments. The deposit amount is usually the same as your credit limit (a $500 deposit lends to a $500 credit limit).
Secured cards are generally easier to get approved for and with some cards, you don’t need any previous credit history. So, they’re good as a first card. As long as you make on-time payments, you’ll be helping build your credit history.
Secured Card Pros and Cons
Pros
Cons
They’re easier to get approved for
You must leave a deposit
They help start up your credit
They often don’t earn rewards
Authorized User
Another alternative to store cards is building credit through becoming an authorized user on an existing credit card.
When you’re not in a credit position to get approved for your own credit loan, you can get added as an authorized user on the account of a friend, spouse, family member, acquaintance, or anyone else. Usually, depending on the card issue, only family members are allowed. Verify this with the card issuer/
The primary account holder adds you as an authorized user on the account. Only do this on an account that is in good standing. Once the account is reported to the credit bureaus and to your credit report, the account history of the card becomes yours too.
So, if the primary has had the card open for two years and has made on-time payments all that time, that’s now reflected on your credit report. This can help build your credit history.
Pros and Cons of Becoming an Authorized User
Pros
Cons
It can help your credit
You could have conflicts with the primary cardholder
It’s simple to do and there’s no need to lock up funds
A good credit score will make your life a lot easier; it will help you qualify for loans, apartments and even jobs. But you’re not born with a credit history. Much like you have to spend money to make money, you need to borrow money to prove you’re good at borrowing (and paying back your debts). In fact, according to Nationwide, credit scores help insurance companies predict future losses. So, how can you start your credit-building journey? Here are ways new cardholders can build credit.
Understanding Credit Score Perks
Your credit score is woven into almost every area of your life. “Crummy credit can cost you a fortune throughout your life,” explains Matt Schulz, chief credit analyst at LendingTree. “It’s as simple as that. It’ll lead to higher interest rates and fees on mortgages, credit cards and loans. It can keep you from getting the apartment you want. It can lead to higher insurance premiums. It’s a big, big deal.”
There are two main types of credit scores: your FICO Score and your VantageScore. Most lenders review your FICO Score when making a financing decision. It ranges from 300 to 850, with a “good” score starting in the high 600s. It’s calculated based on a variety of factors, including payment history, credit usage, the length of your credit history, and more. The VantageScore follows similar metrics but focuses less on payment history, allowing scores to be generated faster than FICO. Regardless of the type of score, a proven record of responsible borrowing shows lenders that you’re more likely to pay back your debt, and then they can offer you lower interest rates and charge fewer fees.
Related Read: 7 Unexpected Benefits of a Good Credit Score
New to Credit? Here’s How to Build Your Score Quickly
Get a secured credit card. A secured credit card is a great way to build credit from scratch. It works just like an unsecured card, except that you make a security deposit that is equal to the amount of the credit limit. For example, if you deposit $500, your credit limit is also $500. “Consumers love these cards because they’re easy to get and their low credit limits mean there’s no danger of going too wild on a spending spree,” says Schulz. “Banks love them because there’s no risk. If someone doesn’t pay their bill, the bank simply takes the security deposit. It’s a win for everyone involved.” Before applying for a secured card, make sure the lender reports your usage to the three credit bureaus–Equifax, Experian and TransUnion. If it doesn’t, you won’t build credit. Also, check to see if the lender offers an upgrade to an unsecured card.
Make timely payments. Once you have your first credit card–be it secured or unsecured– focus on paying your bill in full on time, every time. Payment history is a big component of your credit score. Each month you pay your full balance on time, you’re proving your creditworthiness. “Think about it like borrowing the car keys from your parents,” explains Schulz. “The first time you do it, they’re not going to let you do much. Once you’ve shown you can handle a little responsibility, they’ll give you more, though. Eventually, they’ll hand over the keys without thinking much of it.”
Use your card often. The more you use your card, the better. The key, though, is to use it smartly. Pick up the check when you’re out to dinner with friends, knowing they’ll reimburse you for their meals. Use it for everyday expenses like groceries and gas. You can even use your card to pay rent, though there will usually be processing fees added on by your landlord. Just remember: Pay the bill in full, every month. You should also never max out your card. Your credit utilization ratio–how much credit you’re using compared to the total credit available to you–is another aspect of your credit score.
Become an authorized user. If you can’t open a credit card yourself yet, become an authorized user on someone else’s account. Ultimately, they will be responsible for the charges on the account, so you need to have a good relationship with this person. Becoming an authorized user allows you to link to this person’s good credit and thus build yours with steady payments.
Apply for a credit-builder loan. A unique way to build credit is to apply for a credit-builder loan. With these loans, you make monthly payments to the lender for a set period of time. The deposits are kept in a savings account or a certificate of deposit. Once the payment period ends, you get the money back, sans fees or interest charged.
Be determined. Building credit can be daunting, but don’t give up. With each passing month, your timely payments will boost your score. Use texts or autopay features to make sure you’re paying your bills on time. Do whatever you need to do to keep at it. Different apps and some credit cards offer estimates of your credit score, but know that you’re entitled to one free credit report every year from AnnualCreditReport.com. Get in the habit of checking your report every year to make sure there are no lingering issues that are hampering your credit-building endeavors.
About the Author
Chris O’Shea is a freelance writer whose work has appeared in GQ, NerdWallet, Esquire, New York Magazine, and more.
Congratulations! You’re officially an adult. Turning 18 opens a world of possibilities and freedom, but it also comes with additional responsibilities. One important responsibility to start thinking about is building your credit profile.
Credit can be a critical resource. A good credit score helps you get approved for loans and credit cards. It also helps reduce the expense associated with your debts, as you’re more likely to get approved for lower interest rates if your credit is better.
Your credit score and history can also help—or hinder—you when you’re applying for certain types of employment, a new apartment, utilities, or auto insurance. Find out more about credit and how to build credit at 18 in the guide below.
How to Start Building Credit at 18
1. Learn How Credit Works 2. Monitor Your Credit Score and Reports 3. Sign Up for ExtraCredit 4. Become an Authorized User 5. Get a Secured Credit Card 6. Apply for a Credit Builder Loan 7. Understand How Student Loans Can Help Your Credit 8. Don’t Try to Overdo It 9. Make a Budget and Stick to It
1. Learn How Credit Works
You know that knowledge is power, and understanding how to get credit and how it all works can make a big difference. Here are a few basics.
Your Credit Score
There are multiple scoring models, but they all work to provide a numerical score that tells lenders how likely you are to pay back your debts. Higher credit scores are more attractive to lenders and creditors. Five main factors influence your score:
Your Credit Report
Your credit reports are maintained by three major credit bureaus—Experian, TransUnion, and Equifax. They contain data on your current and past debts, payment history, residential history, and other information about your credit history. This data is supplied by lenders, creditors, and businesses where you have accounts. The information on these reports is fed into the credit scoring models to determine your credit score.
Here’s where it starts getting complex. The information on those reports isn’t always the same. Some businesses and lenders only report to one or two of the credit bureaus. Some don’t report to any.
So, your credit report can be a little different with each of the bureaus. That means your credit score can also vary depending on which report and scoring model is being used.
2. Monitor Your Credit Score and Reports
Once you understand some basics about credit, you should take a look at your own credit reports. Monitoring your credit is one of the best ways to learn what will positively or negatively impact your scores. It also helps you catch inaccuracies or signs of identity theft sooner. Is there an account on your report that’s not yours? It could be bringing your score down even before you learn how to start building credit! If you find inaccurate negative information on your credit report, you can challenge it.
There are a few ways to check your credit reports.
AnnualCreditReport: You can request one report per year from each of the three bureaus at AnnualCreditReport.com. The bureaus are allowing you to request your reports weekly due to the effects of coronavirus through April 2022.
Credit Report Card: You can also get information about your credit reports via the free Credit Report Card at Credit.com. This is a breakdown of how you’re doing with each of the five major factors that impact your credit score. Your personal Credit Report Card can help you understand where you might need to work to positively impact your credit.
ExtraCredit: If you’re really serious about understanding your credit reports and scores, sign up for ExtraCredit. The Track It feature lets you see 28 of your FICO® scores and credit reports from all three credit bureaus. These scores are ones that lenders look at when making approval decisions.
ExtraCredit does more than just show you your credit scores. Have you recently started paying rent or utilities? The Build It feature lets you add them as tradelines with the TransUnion and Equifax credit bureaus. That means you’ll get credit for bills you’re already paying—building your credit profile each month that you pay those bills.
This is important, because rent and utility payments don’t usually show up on credit reports. That’s simply because utility companies and landlords don’t tend to bother to report them. ExtraCredit helps you ensure you’re getting credit for those on-time payments anyway.
4. Become an Authorized User
If a friend or family member has a credit card and is an account holder in good standing—meaning they pay their bills on time—ask if they’ll add you as an authorized user. Make sure that their credit card company reports to the credit bureaus for authorized users first or this is a pointless exercise.
You don’t even need a card or to use their account. If the credit card company reports on authorized users, you’ll get their on-time payments posted to your credit reports if your friend or family member makes them.
If you’re looking for how to start building credit at 18, this can be a quick method. However, it does come with some potential risk. If that person doesn’t pay on time or runs up their credit card balance, your credit score could suffer from the negative reports too.
5. Get a Starter Credit Card
For those who want to know how to start credit building without someone else, a secured credit card might be a good place to start. Some credit card companies also offer unsecured credit cards for those with no credit. These tend to have low credit limits and may have high interest rates.
If you can’t find an unsecured credit card, though, a secured card is much easier to get in general. You have to secure it with a deposit—typically in the amount of the credit limit. For example, if you put down a $250 security deposit, your initial credit limit is $250.
You build credit by using the card and paying the bill on time each month. Make sure you opt for a credit card that reports to all three of the bureaus to maximize the benefits to your credit history. Usually after a certain number of timely payments, you get your security deposit back and may even be eligible for an increase in credit limit.
Two options you might consider are the OpenSky Secured Visa and UNITY Visa Secured card.
OpenSky® Secured Visa® Credit Card
No credit check to apply and find out instantly if you are approved
OpenSky gives everyone an opportunity to improve their credit with an 85% average approval rate for the past 5 years
Get considered for a credit line increase after 6 months, with no additional deposit required
You could be eligible for the OpenSky Gold Unsecured Card after as few as 6 months
Reports to all 3 major credit bureaus monthly, unlike a prepaid or debit card. Easy application, apply in less than 5 minutes right from your mobile device
View your FICO® Score through your OpenSky account, an easy way to stay on top of your credit
Nearly half of OpenSky cardholders who make on-time payments improve their FICO score 30+ points in the first 3 months
Your refundable* deposit, as low as $200, becomes your OpenSky Visa credit limit
Offer flexible payment due dates which allow you to choose any available due date that fits your payment schedule
*View the cardholder agreement
UNITY® Visa Secured Credit Card – The Comeback Card™
Unlike your Prepaid Card, UNITY Visa secured card can help you build your credit. Apply online in less than 5 minutes, and you could be approved today!
No Minimum Credit Score required; low fixed interest rate of 17.99%; Fully refundable FDIC security deposit* required at time of application; if you have a min of $250 to deposit immediately, you can start now!
No application fee or penalty rate
Monthly reporting to all 3 major credit bureaus
24/7 online access to your account
*See the Cardholder Agreement for more details.
6. Apply for a Credit Builder Loan
Remember that credit mix is important to your credit score. That means you can’t just have one type of credit—such as a credit card—for maximum impact. You may also want an installment loan on your account.
A credit builder loan is one way to get an installment account on your credit history. These work like a traditional loan in reverse: if you’re approved, your funds get placed in a secured certificate of deposit and are given to you after you’ve paid off the loan.
>> Read our Review of Self Credit Builder Accounts
As you pay the loan as agreed, you’ll enjoy the benefit of positive payment history building on your credit report. Once you pay off the loan, the savings account is unlocked and you gain access to the money.
7. Understand How Student Loans Can Help Your Credit
If you have a student loan in your name, you may already have an installment loan on your credit history. This is true whether your parents acted as guarantors or cosigners or not, but it’s not true if your parent simply took the loan out for you. In that case, the lender would only report on your parent’s credit history.
As with any type of debt, student loans can help you start building credit if you pay them on time. So make sure you keep up with your loan status. If you use options such as deferment—especially during COVID-19—keep an eye on your credit report. Make sure your lender doesn’t report you as paying late when you’re within an agreed-upon deferment period.
8. Don’t Try to Overdo It
Building credit is a marathon, not a 100-yard dash. While some actions can positively impact your credit quickly, as a young person you’re unlikely to have a super robust credit history in just a few months.
Take your time and don’t try to engage in every credit-building tactic at once. You certainly don’t want to max out your debt in an effort to build credit. That could leave you unable to make your payments, which tanks your credit score before you have time to really build it.
9. Make a Budget and Stick to It
Finally, make a budget and stick to it. Spend what you can afford, and don’t take on debts you can’t pay fairly easily. You have years to continue building your credit, and a history of smart decisions and timely payments is one of the best things for your score long-term.
Start Building Credit Now
Building your credit at 18 is possible. It just takes time, commitment to making smart money decisions and an understanding of how credit works.
Article originally published March 31st, 2020. Updated December 16th, 2022.
The Coronavirus Aid, Relief, and Economic Security Act, an economic relief package in response to the COVID-19 coronavirus pandemic, waives the 10% early withdrawal penalty for individuals who take out up to $100,000 from qualified retirement accounts for coronavirus-related purposes. Learn More.
Note: This article does not constitute legal advice. Please consult a lawyer or financial/ tax advisor about your specific situation.
Paying off debts or covering an unplanned expense are common reasons people tap into their 401(k)s early. But a 401(k) withdrawal can come with hefty tax penalties if you pull your money out too soon. Find out more about how to take money out of a 401(k) below, and decide whether it’s the right decision for you.
How to Withdraw from Your 401(k) Early
Your 401(k) account is meant to be a retirement account. That means it’s set up for you to start withdrawing from after a certain age—generally 59 ½. But you may be able to withdraw sooner if you feel you need your money now. Here’s how.
Check with your employer to find out if early withdrawals are an option. Not every employer allows withdrawals.
Find out what types of withdrawals are allowed. In some cases, 401(k) withdrawals are limited to certain amounts or allowed only for certain reasons.
Get withdrawal paperwork from your human resources department or download it from your 401(k) provider’s site.
Review the penalties and taxes you may pay for taking the money out early and ensure that you are okay with them.
Complete the paperwork and submit it. Disbursements may be made by check or directly into your bank account, depending on the provider, and may take up to several business days once the 401(k) withdrawal is approved.
401(k) Early Withdrawal Penalty
In general, when you make a withdrawal from your 401(k) before you reach age 59 ½, the Internal Revenue Service may charge you a 10% early withdrawal penalty.
You’ll also pay taxes on any amounts you cash out. That’s because your 401(k) was funded with pre-tax income from your paycheck. You didn’t pay taxes on it at that time, but you must pay taxes on the money when you draw it out to use as income later.
401(k) Hardship Distribution
If your employer plan provides for hardship distributions, you can take a portion of your 401(k) funds to assist in paying for some specific expenses without paying the standard 10% early withdrawal penalty. Each employer plan is different, though, so even if your plan allows for hardship distributions, it may not allow for the particular use you have in mind.
For example, some plans allow for medical or funeral expenses but will not allow for tuition and education expenses. Some plans will, regardless, the plan must have clear requirements. Before considering a hardship distribution, be sure to read the fine print on your plan to determine if your need is eligible.
In general, some expenses that can be covered using a hardship distribution might include:
Tuition, including room and board, for yourself, your spouse, dependents and certain beneficiaries
Medical expenses for yourself, your spouse or dependents
Purchase costs for your principal residence, not including mortgage payments
Costs related to avoiding foreclosure on or eviction from your principal residence
Repair costs for damages to your principal residence
Funeral expenses for deceased parents, spouse or dependents
Hardship withdrawals have hit a record high for the first time in nearly 20 years.This kind of spike is a testament to how it has become increasingly difficult for Americans to have a retirement safety net in the current economic climate. This increase is likely due to inflation concerns creating further economic hardship. Use this guide before considering a 401(k) withdrawal.
Even though the early distribution penalty is waived on approved hardship distributions, any withdrawal you make is taxed as regular income. You should consider what that means for your bottom line and review whether you’re pushing up against a higher tax bracket when taking the withdrawal into consideration.
401(k) Loan
Another way to get money from your 401(k) now without paying the withdrawal penalty is a 401(k) loan. This can be a good option if you can’t get a hardship distribution or want to borrow against your 401(k). Plans are not required to provide for loans, so review your plan to determine if this is an option for you.
What Is a 401(k) Loan?
A 401(k) loan is literally a loan that’s funded by your 401(k). When you take out this type of loan, you actually borrow from your future self. These loans come with interest, which you pay back into the 401(k) account—so you’re paying the interest to yourself.
401(k) loans let you take out a certain amount from your 401(k)—usually up to $50,000 or 50% of the account’s assets—without calling it “income.” You can use that money without paying the 10% withdrawal penalty or paying taxes on it.
Advantages of 401(k) Loans
Unlike a hardship distribution, you do not need to demonstrate financial need to take out a 401(k) loan. As long as your plan allows for loans and you meet the terms, you can take out this type of loan. Because interest payments on these loans are only meant to restore the account to its original state (as if you had not taken out the loan), 401(k) loans often have lower interest rates than other loans. And 401(k) loans for approved purposes may not require a credit check, so they might be an option when other credit is not. This is especially true as your employer may simply take the 401(k) loan repayments directly out of your paycheck.
Disadvantages of 401(k) Loans
When you take money out of your 401(k), it’s no longer earning interest for you. Typically, the interest you pay on the loan isn’t as much as your 401(k) could be earning in the same time period. That can mean a reduced total when it comes time to retire.
In most cases, you are required to repay a 401(k) loan within five years. If you quit your job before you pay off the total amount of the loan, you might be asked to repay the rest immediately. If you fail to meet the terms of the loan, the remainder of the loan might be treated as a withdrawal. That means you’re on the hook for taxes and the 10% withdrawal penalty.
401(k) Withdrawals After Age 59½
If you retire or lose your job after you turn 55, you may be able to avoid the 10% early withdrawal fee. In general, this applies only to the 401(k) plan from the employer you just left. Earlier plans are not eligible.
Once you reach age 59½, you may begin withdrawing funds from your 401(k) without penalty. You can choose a lump-sum distribution or periodic distributions based on your personal needs. Keep in mind that you’ll pay income taxes on lump-sum distributions right away. It’s a good idea to talk to your financial planner to decide what option is best for you.
You can, however, leave your retirement funds where they are until you reach age 72. At that point, plan participants encounter Required Minimum Distributions, when the IRS requires that you begin taking distributions of a certain amount each year (before 2020, the age was 70½). Your tax burden on those distributions will depend on your total annual income.
Are There Good Alternatives to Early 401(k) Withdrawals?
For those with good credit scores, there are a number of alternatives to 401(k) withdrawals that don’t come with a 10% tax penalty and don’t dip into your retirement savings. Here are a few options to consider.
Home Equity Lines of Credit
If you have equity in your home—which means it’s worth more than you owe on it—you might be able to borrow against that value. You can then use the money from a home equity line of credit (HELOC) to cover expenses or pay down other debts.
Pros: Because home equity lines of credit are secured, you may be able to secure a lower interest rate on them than with other types of debt. They also offer some flexibility, as you can use as much of the line of credit as you need as you see fit.
Cons: You need equity to access this type of debt. You also have to ensure you can pay it off if you plan to sell your home.
Personal Loans
Personal loans are typically unsecured debts you can use for personal purposes. If you’re approved for a personal loan, you might use it to pay off medical bills, consolidate other debts or cover an emergency home repair, for example.
Pros: Personal loans are available for all types of credit histories and needs. Doing a little research can often turn up a loan option that might work for you. Repayments are typically made over long periods, which can make monthly payments affordable.
Cons: Depending on your creditworthiness, a personal loan can come with a higher interest rate than other options. If you have bad or no credit, you may be limited to credit building loans, which can require a deposit.
Credit Cards With Low APR Introductory Offers
Credit cards with an introductory 0% APR on purchases make it possible to finance a large purchase and pay it off over several months without paying interest.
UNITY® Visa Secured Credit Card – The Comeback Card™
Unlike your Prepaid Card, UNITY Visa secured card can help you build your credit. Apply online in less than 5 minutes, and you could be approved today!
No Minimum Credit Score required; low fixed interest rate of 17.99%; Fully refundable FDIC security deposit* required at time of application; if you have a min of $250 to deposit immediately, you can start now!
No application fee or penalty rate
Monthly reporting to all 3 major credit bureaus
24/7 online access to your account
*See the Cardholder Agreement for more details.
Pros: Credit cards with low APR offers can let you finance purchases or consolidate credit card debt and pay it off faster. They can also help you continue to improve your credit as you make timely payments.
Cons: Most of these cards require good to excellent credit. If you don’t pay off the balance within the required period, you can get hit with hefty interest rates.
Your 401(k) and Your Future
When you’re facing a financial crisis right now, borrowing from your 401(k) can seem like an obvious answer. But carefully weigh the costs of doing so. You are, in effect, stealing from your future. If you can, look for other options that help both current-you and future-you.
If you’ve ever had to repair your credit, you know how much of a struggle removing inaccuracies from your reports can be. The bad news is that in many cases, after removing negative accounts from your credit history you may only see a slight increase or maybe even no change at all to your credit score.
Why? Because you need a healthy credit profile to have a healthy credit score. If all you have is negative items on your credit reports and you’ve removed them all, you might not have much of a report left to build a credit score with.
One of the easiest ways to build a good credit score is to improve your credit utilization ratio. You can do this by expanding the total amount of credit available to you by applying for a new credit card.
If you’re currently working with a low credit score right now, and are worried about being approved for a credit card, we’ve got you covered. Here’s our top 4 easy approval cards.
Best Overall Card: Chime
Secured Chime Credit Builder Visa® Credit Card
Qualifying direct deposit of $200 or more. Checking account required.
No annual fee. No minimum* security deposit. No credit check to appy
*Money added to Credit Builder will be held in a secured account as collateral for your Credit Builder Visa card, which means you can spend up to this amount on your card. This is money you can use to pay off your charges at the end of every month.
Build credit history with your own money on everyday purchases
View and track your FICO® Score right in the Chime app. FICO Scores are used by 90% of top lenders*
Chime is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. The Chime Credit Builder Visa® Card is issued by Stride Bank, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted.
If you’re ready to start building your credit history, we suggest Chime as a simple, easy way to start. Unlike most other secured cards, Chime does not require a minimum security deposit to get started.*
So if you don’t have a large chunk of cash to put down up front, you can put down however much you’re able to afford. That amount becomes your credit limit, so you can start building up your limit over time.
Even better – they also don’t have a minimum credit score required to get started! In fact, they don’t run a credit check at all, so you don’t have to worry about a hard credit pull popping up on your report.
*Note: To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Checking Account.
Other Recommended Secured Credit Cards
Most secured credit cards require the user to put down a cash deposit to secure their line of credit, which makes them a great option for people looking to build up their credit with on-time payments. Here are a few other secured cards we’d recommend.
Combined credit builder account and secured card products to help you build credit and save* money (minus interest and fees) No credit check.
No credit check. No credit history required.
Start with a credit builder account that reports to all 3 credit bureaus. Each on-time monthly payment builds credit history and savings. Choose the plan that works for you.
Make at least 3 monthly payments on time, have $100 or more in savings progress in your account, and be in good standing* You’ll automatically be eligible for the Self Visa® Credit Card, without a credit check.
Your savings progress from your Credit Builder Account acts as your refundable security deposit.
The Self Visa® Credit Card is accepted at millions of locations in the U.S.
Stay on track with credit utilization monitoring, auto pay, account reminders, a mobile app, and dedicated customer support.
*Sample Product for Credit Builder Account: $48 monthly payment, 12 month term with a $9 admin fee at a 15.92% Annual Percentage Rate. Please refer to www.self.inc/pricing for the most recent pricing options.
**Disclaimers, Rates and Fees: https://www.self.inc/card-agreement and https://www.self.inc/terms-of-service
We like the Self – Credit Builder Account + Secured Visa® Credit Card combo because it uses your progress on your credit-builder loan to approve you for a credit card, allowing you to side-step a credit inquiry to qualify for your card.
OpenSky Secured Visa
OpenSky® Secured Visa® Credit Card
No credit check to apply and find out instantly if you are approved
OpenSky gives everyone an opportunity to improve their credit with an 85% average approval rate for the past 5 years
Get considered for a credit line increase after 6 months, with no additional deposit required
You could be eligible for the OpenSky Gold Unsecured Card after as few as 6 months
Reports to all 3 major credit bureaus monthly, unlike a prepaid or debit card. Easy application, apply in less than 5 minutes right from your mobile device
View your FICO® Score through your OpenSky account, an easy way to stay on top of your credit
Nearly half of OpenSky cardholders who make on-time payments improve their FICO score 30+ points in the first 3 months
Your refundable* deposit, as low as $200, becomes your OpenSky Visa credit limit
Offer flexible payment due dates which allow you to choose any available due date that fits your payment schedule
*View the cardholder agreement
We like OpenSky Secured Visa because there is no credit check required to apply, and you can request an extension on your credit line after six months. Unlike most other secured cards, OpenSky also allows you to fund your security deposit in payments, making it even easier to get started.
Best Balance Transfer Card: UNITY® Visa Secured Credit Card – The Comeback Card™
UNITY® Visa Secured Credit Card – The Comeback Card™
Unlike your Prepaid Card, UNITY Visa secured card can help you build your credit. Apply online in less than 5 minutes, and you could be approved today!
No Minimum Credit Score required; low fixed interest rate of 17.99%; Fully refundable FDIC security deposit* required at time of application; if you have a min of $250 to deposit immediately, you can start now!
No application fee or penalty rate
Monthly reporting to all 3 major credit bureaus
24/7 online access to your account
*See the Cardholder Agreement for more details.
We like this card because not only does it report your on-time payments to all three credit bureaus (helping you build up those positive credit signals) but it also offers a promotional rate for balance transfers of 9.95% for six months. Considering how difficult it can be to find a good balance transfer card with an easier application process, we especially recommend this card if your goal is to rearrange your credit card debt.
Building (and Protecting) Your Credit
While your score may not be strong enough to allow you apply for credit cards that offer better cashback or rewards, there are many credit cards in our list above that offer at least some of those same benefits and provide more support for reporting your good credit behavior to the bureaus.
Just as a reminder, payment history can be the heaviest factor when it comes to calculating your credit score. Although you may want to improve your score by applying for a new credit card, make sure that you can avoid any late payments that may hit your reports and jeopardize all your hard work.
Open a BMO Harris Premier™ Account online and get a $500 cash bonus when you have a total of at least $7,500 in qualifying direct deposits within the first 90 days of account opening. Expires 9/15. Conditions Apply.
You’ve picked out what you think is the perfect secured credit card. It has the deposit limit you’re looking for, the right annual fee, and it even offers rewards. Imagine your surprise when the company denies your application. Can that even happen with a secure credit card?
Unfortunately, the answer is yes. But a rejected application doesn’t mean there’s no way forward.
What to Do if You’re Denied a Secured Credit Card
First things first: Don’t get too bummed out. Credit card denials happen all the time. According to a 2022 Salary Finance survey, 33% of polled applicants were denied credit cards in the past year. But there are simple steps you can take to make sure you find a solution that works for you.
1. Determine Why the Credit Card Company Denied Your Application
If you get a denial letter, your first question is likelywhy. Credit card companies want your business, so there’s usually a clear reason. Check your initial notification for the legally required explanation. It may be near the words “adverse action” or “adverse action notice.” But if you still have questions, you can call the customer service line and speak with a representative.
While you’re less likely to face denial when applying for a secured credit card, there are still a few reasons you could get rejected.
You didn’t meet income requirements. Even with a secured credit card, you’re still required to meet a minimum income threshold. Credit card companies want to know you can pay them back, and that requires a consistent form of income.
There was an identity verification issue. If the credit card company can’t verify you’re the one applying, they can’t approve the application.
You have too much debt. If you already have high debt, credit card companies are often weary about allowing you to take on more. You can read more in our article on debt-to-income ratio.
You don’t have a good enough credit score. Yes, even some secured credit cards have a minimum credit requirement. This requirement is often low, but if you still don’t hit that number, it signifies to credit issuers that you may not be able to manage credit.
You can’t pay a deposit. Most secured credit cards require a deposit. That’s what secures your credit line rather than your credit profile. If you can’t come up with the money (often a few hundred dollars), you don’t qualify for the card.
2. Review Your Credit Report
It’s becoming more common for secured credit cards to require no credit check at all. Still, some do. If an issuer denies you due to a poor credit score or history, your first step is to get your hands on your full report.
By law, you can get full credit reports from all three agencies once per year at AnnualCreditReport.com. However, at the beginning of the COVID-19 pandemic, the three major bureaus began offering weekly credit reports, which you can still access for the time being.
Look through the report, checking for any errors, such as misreported debt amounts or incorrect debt collections bills. Verify everything in your report is 100% accurate. These errors — particularly if they relate to misreported debts — can lead to a denial.
3. Address Credit Issues or Errors
If you find any, disputing credit report errors is the next step. Submit disputes either online through Equifax, Experian, and TransUnion’s sites or by mail. The Consumer Financial Protection Bureau has dispute forms for each credit union.
If you received a denial because your credit score is too low and disputing errors doesn’t raise it, you have options.
One way to raise your credit score quickly is to pay down debt as fast as possible. That’s easier said than done, but checking off your debts one by one can help improve your credit score.
There are several strategies to help you pay off debt fast. For more information, see our article on the avalanche, snowball, and snowflake methods.
4. Consider Alternative Credit-Building Options
At the end of the day, a denial may mean a secured credit card isn’t the right option for you. Thankfully, secured cards are far from the only credit-building product on the market. There are alternatives, such as:
Credit-builder loans. Credit-builder loans are a unique product designed to help you build credit from scratch or rebuild poor credit. Unlike a traditional loan, you don’t get access to the funds until after you’ve already paid it off. In the meantime, your lender stores your money and reports your (hopefully timely) payments to credit bureaus.
Becoming an authorized user. An authorized user is someone who has access to another person’s credit card but doesn’t bear the responsibility of paying it off. If you become an authorized user on a family member’s card, your credit can benefit from their on-time payments.
Store credit cards. Some store credit cards don’t require credit checks or have few credit requirements, making it easier to get approved. Pick a store you visit frequently, such as Target or Walmart, and put your usual purchases on that credit card, making sure to pay it off regularly.
5. Reapply or Explore Other Secured Credit Cards
Despite all your research, you may not have applied for the right secured credit card. There are dozens to choose from, and approval may be a lot easier if you apply for a different one.
If it’s a credit issue, focus on secured credit cards with no credit requirements, such as the Discover it Secured Card and Capital One Platinum Secured.
If it’s providing income information you’re worried about, first consider whether a credit card is right for you and whether you can handle regular payments. That said, cards like the OpenSky Secured Visa Card have a high approval rate and very few qualification requirements.
If the card you originally applied for is the secured card of your dreams, your best bet is to improve your credit or fix the issue that caused your denial and try again later. With a few months of dedicated work on your score, you are more likely to get the approval you’re looking for.
Final Word
A credit card denial is far from the end of the world, though it might feel like it for a second. There are reasonable steps you can take, such as improving your credit, applying with a different lender, and addressing any potential errors on your credit report.
Also, think about alternative credit card options. Although a secured credit card can seem like the obvious first option when you have bad credit, there are unsecured credit cards for bad-credit customers, student credit cards for college students who want to start building credit, and even prepaid cards for those just looking for something swipeable to pay with.
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Christopher Murray is a professional personal finance and sustainability writer who enjoys writing about everything from budgeting to unique investing options like SRI and cryptocurrency. He also focuses on how sustainability is the best savings tool around. You can find his work on sites like Bankrate, Money Crashers, FinanceBuzz, Investor Junkie, and Time.
A secured credit card is similar to a traditional card, but it’s backed by a cash deposit that lenders use as collateral.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
A secured credit card is backed by a deposit, which enables lenders to provide secured credit cards to people with no credit history or bad credit. You can build your credit with a secured credit card by using the card regularly, paying off the full balance each month and keeping your credit utilization low.
Read on to learn more about what a secured credit card is, how it works and how you can use one to improve your credit.
What is a secured credit card?
A secured credit card is similar to a traditional card in most respects, except that the card is backed by a cash deposit that lenders use as collateral.
While not all lenders readily offer credit cards for people with bad credit or no credit, a secured credit card is considered lower risk since you are essentially borrowing money from your own cash deposit. If you don’t pay your bill, the lender can simply use your deposit to pay off the balance.
Here are a few key points to keep in mind with secured credit cards:
Credit limit: The credit limit for a secured credit card is usually equal to the amount of cash you provide as a deposit.
Annual percentage rate: The annual percentage rate (APR), or the interest that you’ll accrue by not paying your full balance each month, is typically higher on a secured credit card.
Goods and services: Similar to a traditional credit card, a secured credit card can be used to pay for goods and services, including many bills.
By using a secured credit card with good credit habits, you can build or improve your credit history to help yourself get a better credit card or a loan.
What is the difference between a secured and an unsecured credit card?
The difference between secured and unsecured credit cards is that an unsecured credit card requires no deposit or collateral to open, while a secured credit card does. Think of your cash deposit as “securing” the credit you’ll use to make purchases.
How does a secured credit card work?
When considering secured vs. unsecured credit cards, you should know that a secured credit card works fundamentally the same way as an unsecured card, though it also has some unique features. Here’s how it works:
Once your application is approved, your secured credit card requires a cash deposit.
Your purchases are essentially backed by your deposit, which reduces risk for the lender.
Payments made on the card don’t actually come out of that deposit—you’ll still pay your credit card balance out of your own money every month. Missed payments will still incur interest.
You can make payments on a secured credit card the same way you would any other credit card.
This option is especially useful for those looking to use a credit card to build credit.
As long as you pay off your balance, the deposit will be returned to you when you close the account. But if you don’t make payments on time, the deposit acts as collateral, and the lender will keep the deposit to pay what you owe.
Do secured cards build credit?
If you’re looking to improve your financial history, it can help to use a secured credit card for bad credit repair. They can also be a great option for those who want to get a credit card with no credit. Note, however, that in order to build your credit, you will still need to make on-time payments every month, because a missed or past-due payment can have a negative impact on your credit.
How long does it take to build credit with a secured credit card?
According to FICO, one of the primary credit score providers, new credit lines account for 10 percent of the score they give you. Building credit from scratch can take up to six months, and if you already have credit, it can take many months of consistent, on-time payments on your secured credit card to help boost your credit.
How to get a secured credit card
Secured credit card applications aren’t very different from unsecured credit card applications. If you decide this is the right choice for your credit-building strategy, the process should look something like this:
Step 1. Shop around
Start by looking for secured credit cards with no annual fees—or, if necessary, a low annual fee. If you’re concerned about affording the deposit, you may want to look for options with below-$100 minimums. It’s also worthwhile to prioritize cards with the lowest APR possible in case you need to make partial balance payments.
Step 2. Apply for the card of your choice
Applications can usually be completed online in just a few minutes. You’ll likely need to provide basic personal information like your address, phone number, Social Security number and income.
Step 3. Make an initial deposit
To open your account, you’ll need to make a deposit of no less than the approved minimum. This will either be the same amount or a little less than your credit line.
Step 4. Make additional deposits if desired
Your lender may permit you to make additional deposits to raise your credit line even higher.
Step 5. Make monthly payments
As with any credit card, you’ll need to continue making on-time payments—ideally in full, if possible—in order to maintain good standing and build up your credit.
Banks that offer secured credit cards and secured credit card examples
Most of the major national banks, credit unions and credit card companies offer secured credit cards, including Bank of America, Citi, Wells Fargo and more. Here are a few examples of popular options:
No credit history needed: The Citi® Secured Mastercard® has no annual fee, offers a 22.74 percent APR and requires no credit history for application.
Cash back: The Discover it® Secured Credit Card carries no annual fee, comes with a 23.24 percent APR and offers 1 percent cashback on all purchases plus an extra 1 percent on gas station and restaurant purchases.
High credit limit, low APR: For those who can make a $500 security deposit, Capital One’s Platinum Secured Mastercard® offers up to a $25,000 credit limit with no annual fee and with a 9 to 18 percent APR.
Credit union: Digital Federal Credit Union’s Visa® Platinum Secured Credit Card boasts an 11.5 percent APR and no annual fee but does require membership in the credit union and a $500 deposit.
How to use a secured credit card to rebuild credit
Once you have a secured credit card, you can begin using it to build or improve your credit, which could ultimately lead you on a path to a high credit score and the opportunity to get a car loan or mortgage. Here are a few tips for using your card effectively with the goal of building up credit.
Make sure your card issuer reports to the credit bureaus
There are three major credit bureaus that keep track of your credit history, so you’ll want to be sure your credit card issuer is reporting your payments so you can build your credit. Check the credit card agreement or call the card’s issuing financial institution to check before you apply.
Use your card regularly
Your card will only make an impact on your credit reports if you use it, so you’ll want to make regular purchases with it. However, it’s important to use your card responsibly, so aim for manageable purchases like groceries or small bills.
Keep your credit utilization low
One of the factors affecting your credit score is credit utilization, which is the ratio of available credit to credit you’re actually using. A low ratio suggests to creditors that you are a low-risk borrower, which can increase your score. We recommend using under 30 percent of your total available credit and paying off anything above that as quickly as possible.
Pay off your full balance every month
An important part of managing a credit card is paying off the full balance every month, which helps you avoid paying any interest or falling behind on payments. A late or missed payment can lead to a negative item on your credit reports.
Secured credit card vs. prepaid debit card
On the surface, a secured credit card may seem like the same thing as a prepaid debit card. However, there are a few key differences:
Credit history: Debit cards do not contribute to your credit history, while credit card payments do.
Deposit collateral vs. prepaid cash: A secured credit card does not actually use your deposit to pay your balance—unless the lender needs to use it as collateral for a missed payment. Prepaid debit cards draw from the deposited cash any time they are used to make payments.
Frequently asked questions
Why would someone use a secured card?
People with no credit history or a low credit score may use a secured credit card in order to build or rebuild their credit. This option can be easier to get for those without a strong credit history.
Do I get my deposit back from a secured credit card?
If your deposit isn’t used as collateral for a missed payment, you will get your deposit back when you close your account.
What is an unsecured credit card?
An unsecured credit card is simply a credit card that does not require a deposit to open.
Do secured credit cards build credit?
Secured credit cards do help users build credit if they are used responsibly. Regular, on-time payments help build credit. Missing payments on a secured credit card will still likely hurt your credit.
Who should consider using a secured credit card
Overall, secured credit cards offer an excellent way to build credit, especially for those who have no credit history or poor credit. However, once you’re able to qualify for a regular credit card, it’s often beneficial to do so, though you may want to consider consulting your financial institution first to make sure. Regular credit cards offer better interest rates and credit limits, and many also offer more cashback reward options.
If you’re looking to get a secured credit card to fix your credit, make sure to take a close look at your credit reports for any inaccurate information that could be bringing down your score. If you need assistance formulating a solid credit repair strategy, consider contacting the consultants at Lexington Law to get help addressing inaccurate or unfair negative items on your credit reports.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
Reviewed By
Vince R. Mayr
Supervising Attorney of Bankruptcies
Vince has considerable expertise in the field of bankruptcy law.
He has represented clients in more than 3,000 bankruptcy matters under chapters 7, 11, 12, and 13 of the U.S. Bankruptcy Code. Vince earned his Bachelor of Science Degree in Government from the University of Maryland. His Masters of Public Administration degree was earned from Golden Gate University School of Public Administration. His Juris Doctor was earned at Golden Gate University School of Law, San Francisco, California. Vince is licensed to practice law in Arizona, Nevada, and Colorado. He is located in the Phoenix office.