Best Secured Credit Card for Bad Credit of 2018

There are two things you should know about secured credit cards.

First, you have a lot of options. Second, you don’t have to choose the first card that sends you an offer in the mail.

If you need a credit card, taking the time to find the right one may seem like it’s not worth the effort. However, choosing the wrong secured credit card can cost you a lot of money over time, money that most of us can’t afford to lose. At the same time, you want a card that’s going to help you build your credit.

We’ve done all of that research for you, analyzing the leading secured credit cards to provide a ranking of the best cards by their overall characteristics and then by how they rank in specific situations. In this guide, you’ll find the following expert information:

HighYa’s Top Choice for the Best Secured Credit Card

Best Overall Secured Credit Card

The Discover it Secured is the best overall secured credit card because it is the card that most resembles the benefits and rewards you can get from a full-fledged credit card for someone with good credit.

Within that mix of benefits and rewards is the ability to earn cash back on the purchases you make, you won’t pay an annual fee and your first late payment won’t incur a charge.

In this sense, it’s a perfect choice if you’re rebuilding your credit and want a card that’s going to give you a little leeway as you learn how to use a credit card responsibly, and that rewards you for making purchases.

We also believe it’s an excellent choice because Discover’s customer service is top-notch. So, if you have questions about how to use your card or you want to know what a specific charge or fee is for, their team will, more often than not, give you the answers you’re looking for in a friendly way.

The following chart shows our rankings for the six cards we analyzed:

Rank Card Overall Grade APR Penalty APR Annual Fee Late Fee Rewards Security Deposit
1 Discover it Secured B+ D A A A A B
2 USAA Secured AmEx B A A C B D A
3 Harley-Davidson Secured B D A A C B A
4 OpenSky Secured Visa C B A C B D B
5 Citi Secured Mastercard C- D D A C D B

 

Based on these grades, we ranked the cards #1 through #5. Below, we present the basic features of the cards and give you our thoughts on their main strength and weakness:

 

#1. Discover it Secured Card
Discover it Secured
Summary: The best card by virtue of its overall quality. It has no annual fee, a waived first late fee and rewards on purchases. The high APR is the card’s main weakness.
Annual Fee Security Deposit Regular APR
$0 $200 - $2,500 24.74%
More on this card: Read Our Full Review

 

 

#2. USAA Secured American Express
USAA Secured American Express
Summary: This card has an excellent low-end APR, which will save you money if you tend to carry balances. Its main drawback is that only members of USAA (military bank) are able to get the card.
Annual Fee Security Deposit Regular APR
$35 $250 - $5,000 11.65% - 21.65%
More on this card: Read Our Full Review

 

#3. Harley-Davidson Secured Card
Harley-Davidson Secured Card
Summary: Rewards are what pushed this card up to third place, along with its lack of a penalty APR and annual fee. A high APR and up to a $38 late fee are its drawbacks.
Annual Fee Security Deposit Regular APR
$0 $300 - $5,000 24.99%
More on this card: Read Our Full Review

 

#4. OpenSky Secured Visa
OpenSky Secured Visa
Summary: A middle-of-the-road option with a low APR and the lowest late fees but not much else to set itself apart from the other four cards on the list.
Annual Fee Security Deposit Regular APR
$35 $200 - $3,000 19.14%
More on this card: Read Our Full Review

 

#5. Citi Secured Mastercard
Citi Secured Mastercard
Summary: Its best feature is the lack of an annual fee. A high interest rate, restrictive deposit limits and a penalty APR of 29.99% far outweigh the good the card offers.
Annual Fee Security Deposit Regular APR
$0 $200 - $2,500 24.49%
More on this card: Read Our Full Review

 

HighYa’s Picks for the Best Secured Credit Cards for Specific Situations

We created our overall rankings to help you see which card is best based purely on numbers and the assumption that the person using the card always pays their bill in full, never carries a balance, and doesn’t pay late.

While that’s the ideal situation, it’s not the typical situation that you find yourself in. Our research indicates, for example, that 41% of people who have a credit card to carry a balance.

So, because not every consumer is the same, we created rankings for the best cards for the following situations:

Best Secured Card for Carrying a Balance

Best for Carrying a Balance: USAA Secured AmEx

Most credit cards lure you in with rewards and, in thinking about the cash bonus you can get or the money you earn from spending, you overlook APR, which stands for “annual percentage rate”. If you tend to carry balances on your card, though, you need to look at APR first.

Your credit card company uses APR to calculate how much interest they’ll charge you if you don’t pay off your balance in full. Basically, they calculate interest each day, add it up at the end of the month and then tack it on to your bill.

So, if you’re carrying a balance, the goal is to find a card with the best APR. Here are our rankings for cards based on their APR and how much interest you’d pay on an average daily balance of $1,000 over the course of one year:

Rank Card APR Yearly Interest on $1,000 Balance Notes
1 USAA Secured AmEx 11.65% - 21.65% $116.50 USAA has the lowest APR – 11.65%. If you can get this rate, then you’re going to save more than $75 a year in interest payments over the OpenSky.
2 OpenSky Secured Visa 19.14% $194.00 At 19.14%, the OpenSky presents an option between the lowest APR on the AmEx and the 24+% APR’s of the other three cards. It’s a good middle ground.
3 Discover it Secured 24.49% $244.90 Discover normally has low interest rates but, for its secured card, it’s among the highest. Interest on a $1K daily balance will cost you more than $120 above what you’d pay with the USAA card.
4 Citi Secured Mastercard 24.74% $247.40 This card’s APR is as high as the highest interest rate on most non-secured credit cards. Yearly cost is more than $130 higher than the USAA card.
5 Harley-Davidson Secured 24.99% $249.99 This card’s high APR lands it at the bottom of the rankings. Over the course of one year, it will cost you nearly $250 in interest payments on a $1,000 balance.

Things to Consider

What makes this category unique is that there are four cards with a single APR and one card with a range of APR’s. The USAA card will give you an APR between 11.65% and 21.65%. USAA will determine your rate by your credit scores and credit history. So, even if you have low scores, an absence of late payments may work in your favor and get you a lower APR.

Because it’s not a guarantee which rate you’ll get – they tell you after you’ve been approved. There's a good chance your APR will be lower than all the other cards on the list. Now, in the event that you’ve got credit scores in the low 500’s, we think that there’s a small chance you’ll get the 11.65%. However, anything above 600 could put you in position for that lower rate.

What’s great about the USAA card is that even their highest APR is only 2% higher than the OpenSky and a full 5% lower than Discover, Citi and Harley cards.

Now, the other cards offer the advantage of having one APR. So, if you’d rather go with known APR instead of not knowing your USAA card’s APR until they approve your application, then the OpenSky will probably be a better fit for your balances, especially if you have credit scores in the 500’s.

Best Secured Card for Earning Rewards

Best Secured Card for Earning Rewards: Discover it Secured

A credit card’s rewards usually take the spotlight when you’re discussing the best credit cards. However, most secured credit cards don’t offer rewards. The bank offering the card is pretty skeptical about you being a good investment and they don’t want to give away free money, airplane miles or hotel points if, down the road, your account will go into collections

That being said, two of the five cards we ranked have rewards and, of those two cards, the Discover is the clear winner based on $12,000 of yearly spending:

Rank Card Estimated Yearly Rewards Notes
1 Discover it Secured $140
($280 first year)
Discover is the top choice because it provides 2% cash back on gas purchases and 1% on everything else. Also, Discover doubles your first-year rewards.
2 Harley-Davidson Secured $120 The card’s $120 in yearly rewards is a nice perk but you can only redeem those rewards for Harley-Davidson purchases, making them far less valuable to the average person.
3 USAA Secured AmEx $0 While the card has no rewards, its reasonable APR’s, late fees and annual fee mean that the card won’t cost you as much per year as the next two cards.
4 OpenSky Secured Visa $0 No rewards mean this card’s value is minimal but, for those who often pay late, you’ll save $10 per late payment over the Discover it Secured.
5 Citi Secured Mastercard $0 Card has no rewards and its penalty APR means that, if you pay late, this card is going to cost you far more in interest payment than any of the cards on this list.

Things to Consider

One of the main things you need to remember is that credit card rewards programs don’t give you any points, miles or cash for fee-based payments you make. So, if you end up paying $30 in interest one month, that $30 won’t earn rewards. The same goes for any balance transfers or cash advances you make.

The reason, in part, that credit card companies do this is that they make money when you use your card at a store. Each time you swipe your card to pay for something, they get a little bit of money. However, when you’re paying a late fee, there’s no money to be made.

Another thing that’s important to consider is your spending habits. As you graduate to more lucrative cash rewards credit cards, you’ll encounter various bonuses that may reward you more for purchases at restaurants than it does for purchases at gas stations.

Knowing where you spend your money will help identify which cards will reward you the most, although we admit that this point isn’t as important for secured credit cards because so few of them offered rewards.

The Discover it Secured is the only one we’ve reviewed that has a 2% bonus on a certain category, making it the best rewards card in the secured credit card category, in our opinion.

Best Secured Card If You Often Pay Late

Best Secured Card If You Often Pay Late: OpenSky Secured Visa

Ideally, you could own a credit card without paying any fees. However, that’s not the case. MarketWatch reported in 2018 that about 1 out of every 4 consumers had paid their credit card late, with around 35% of those late-payers saying they simply forgot to pay their bill.

Because late payments are so prevalent, it can help to understand which secured credit cards the most forgiving. We’ve ranked each secured credit card according to how much it would cost you to make five late payments:

Rank Card Five Late Payments Notes
1 OpenSky Secured Visa $135 A $27 late fee makes this the most affordable card you can own if you often pay late. The card has no penalty APR, either, which means your interest rate will stay the same if you pay late or on-time.
2 Discover it Secured $148 Your first late payment with this card won’t cost you anything but Discover will charge you $37 for every subsequent late payment. The $10 difference makes this card slightly more expensive than the OpenSky.
3 USAA Secured AmEx $155 You’ll pay $25 for the first late payment. If you have another late payment within six months, the fee goes up to $35.
4 Harley-Davidson Secured $190 Of the five cards, this one has the highest late fee – up to $38. However, because the card has no penalty APR, it avoids last place.
5 Citi Secured Mastercard $180 Late fee is up to $35, which is lower than the Harley card. However, Citi will impose a penalty APR of 29.99% if you pay late, which can cost $25 per month on a $1K balance.

Things to Consider

As we mentioned earlier, consumers have indicated the main reason they pay their credit cards late is that they forget to make the payment.

To avoid this, set up automatic payments via your credit card’s online account. You’ll have to link a checking account in order to make this happen. If, for some reason, your secured credit card doesn’t allow you to make automatic payments, you can set up a bill-pay account through your bank.

The main difference between these options is your credit card company usually allows you to automatically make the minimum payment on your card, which protects you from any late fees as the result of not paying enough to meet the minimum payment.

Setting up bill pay through your bank, however, means you have to tell the bank to pay a certain amount each month. This can be dangerous because as your credit-card balance goes up or you carry a balance, your monthly payments go up.

So, say your minimum payment the month you set up bill pay is $25. But, over the next couple of months, you make some big purchases on your card and your balance goes up by $1,000.

Your minimum payment then goes up to $35. Since you’ve got bill pay set up, you’ll make your payment on time, but the $25 won’t be enough to the new monthly payment. There’s a good chance you won’t notice it and your account can become 30- or 60-days late without you even knowing.

Not only will this mistake cost you a late fee, but, once it gets past 30 days late, your credit scores could drop significantly, as an account that’s 30-days past-due triggers a negative mark on your credit report.

Best Secured Card for Extra Benefits

Best Secured Card for Extra Benefits: Discover it Secured

A credit card’s benefits really depend on the card. For example, credit cards for people with excellent tend to have plenty of benefits. Extended warranties, price protection, cell phone insurance, travel upgrades and other perks are common.

However, secured credit cards usually strip away all those more-common benefits and provide very few. Here are our rankings for the cards with the best benefits:

Rank Card Notes
1 Discover it Secured Alerts for accounts opened in your name, a cash-back match the first year and the chance to graduate to an unsecured card and get your security deposit refunded make Discover’s benefits the best of the bunch.
2 Harley-Davidson Secured The main benefit of this card is auto rental insurance, which allows you to get complimentary collision damage waiver (CDW) insurance when you use your card to pay for a rental. Make sure you waive the insurance that the rental agency and/or the booking site you used.
3 USAA Secured AmEx Since USAA is a bank and is reserved for military members and their families, their benefits are that they put your security deposit in an interest-earning savings account and that they give you special APR rates if you’re deployed. The interest from the savings account won’t be much, but the lowered APR for deployments is a great benefit.
4 OpenSky Secured Visa This card doesn’t require a credit check, which means that your credit scores won’t drop by the 1-2 points that’s typical when a credit check shows up on your account. The drawback is that the card doesn’t give you access to your credit scores.
5 Citi Secured Mastercard This card finds itself at the bottom of the list because it has no real benefits to speak of outside of the common benefits we’ll talk about in the “Things to Consider” section.

Things to Consider

All but one of the secured credit cards we ranked in this article have two basic benefits: zero liability and free credit scores.

Zero liability means that you aren’t liable for any fraudulent purchases made with your account, provided that you contact the credit card company within a reasonable amount of time. If you see any suspicious charges you didn't make, our advice is to call your credit card company immediately and speak with their fraud department.

You’ll have to answer a few questions to confirm your identity. Once they know it’s you, they can identify the fraudulent charge.

All cards will give you access to your credit scores, too. The Discover, Citi and USAA cards give you a FICO score, which tends to be higher than the VantageScore you get from you Harley-Davidson card as well as from free credit score sites like CreditKarma.

Based on our experience, your FICO score will tend to be a little higher than your VantageScore. However, the difference in those scores isn’t as important as using them to monitor any sharp decreases that may come about, for example, from people opening accounts in your name and not paying them.

Secured Credit Card FAQ

Can I get my security deposit back?

This depends on the card you have. If Discover chooses to upgrade you to an unsecured card because you’ve proven yourself to be a responsible cardholder, they’ll automatically refund your security deposit.

The other cards will allow you to get your security deposit back as long as you pay off your balance in full and close your account.

If you try and close your account simply to get your deposit back but you don't’ have the funds to pay off your balance, the credit card issuer may use a portion of your security deposit to pay off the existing balance.

What happens if I don’t pay my balance?

A couple of things will happen if you can’t, for whichever reason, pay your balance. First, if the payment is more than 30 days late, then your credit card company will most likely report it to the credit bureaus who will then drop your scores based on the computer models they use to calculate your credit scores.

Second, there’s a good chance the credit card company will dip into your security deposit in order to pay off the outstanding balance and they may, once the balance is paid, close your account.

How do I know if I’m approved?

In some cases, the credit card company will tell you within seconds of filling out your online application if you’re approved.

In other cases, you’ll get a message from them saying that they’re going to review your application further before making a decision. If you’re applying for the USAA card, then you’ll find out what your APR is when USAA lets you know if you’re approved.

Some of the factors the credit card company takes into account are your credit scores, recent negative marks on your credit history (delinquencies, bankruptcies, foreclosures, settlements, collections accounts, etc.) and your income.

There’s really no way to tell if you’ll get approved, as every credit profile has its own unique mix of information. You can increase your chances of getting approved by increasing your credit score, which is something we'll talk about in the next section.

How to Use a Secured Credit Card to Build Your Credit

The fact that you’re considering credit cards for bad credit probably means that your credit scores are bad – 620 or below, most likely.

Having bad credit scores can be pretty frustrating, and rightly so. Most lenders base their interest rates on your credit scores, which means lower scores get higher rates. Higher rates create more interest and more interest means higher payments.

The good thing about credit scores is that, over time, you can do some very specific things to make sure your scores go up. The three credit bureaus – Experian, Equifax, and TransUnion – use scoring models that favor certain types of behavior over others. If you can nail those behaviors, your scores will increase.

Always Pay on Time

Around 35% of your credit score relies on your ability to pay your bills on time. If you make a payment that’s more than 30 days late, then your credit score will see a significant drop – expect to see your scores dip more than 20 points.

The best way to pay in full and on time is to set up automatic payments via your credit card. If you don’t have the money to pay your balance off each month, then sign up to make the minimum payment each month.

Also, you don’t actually have to use the card in order to strengthen your payment history. Even if you have a zero balance and you don’t a payment due, the credit bureaus still record that month’s “payment" as being on-time.

Don’t Max Out Your Credit Card

The second most important factor in calculating your credit score is something called utilization ratio, which is an industry term for how much of your credit limit you’re using.

The logic behind this factor is that people who are using up all their credit are more of a risk – they don’t have the money to pay off their card each month, which means they’re more likely to carry a balance and go into debt.

You can use this to your advantage by keeping your credit balance below 30% of the limit. The 30% threshold is one that many experts have identified as the point at which your score will drop significantly.

One easy way to make sure your balance stays low is to pay off your balance each week instead of once a month. Doing so means you can keep your balance low on a weekly basis so that, when your credit card company sends a report of your account to the credit bureau, your utilization ratio will stay under 30%.

In most cases, your credit card company will send the information on or around your due date. The best way to know when they send the info is to call your bank and ask them or find out when your credit report lists your most recent payment to the card.

» See Also: How to Raise Your Credit Score Fast

Our Scoring Methodology

We based our scoring methodology on our own experience of reviewing more than 100 credit cards, along with how each card’s data compared with the other four in our rankings.

For example, we ranked APR’s based on our experience with cash-back cards (lowest rates in the industry) and the APR’s of the five cards offered. This combination of factors provides you with a grading system that seeks to put the cards in the context of the entire credit card world but with more weight given to how it performs against the cards we ranked.

A good example of this is the APR category. We gave the USAA card an “A” grade because its lowest APR is better than nearly every other credit card available, whether secured or unsecured.

We gave the OpenSky card a B grade because it’s just a couple of percentage points above the national average. Compared to cash back credit cards, the interest rate isn’t that great but, because it fares well against other secured credit cards, we gave it a B.

For the “Best Cards for Specific Situations” section, we let the data drive our rankings, except in the case of the section where we talk about each card’s benefits. In this section, we read through each card’s benefits, wrote them down and spent some time considering which card offered the best combination of customer-focused benefits.


J.R. Duren

J.R. Duren is a personal finance reporter who examines credit cards, credit scores and bank products. J.R. is a three-time winner at the Florida Press Club’s Excellence in Journalism contest and his advice has been featured in MSN and Fox’s money sections.


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