Can You Use Credit Card For Cash App

How to Get a Secured Credit Card

Mike Mozart/Flickr

A secured credit card is just like a regular credit card, but it requires a cash security deposit, which acts as collateral for the credit limit. In terms of usage, it's an identical replacement for a regular credit card, which can be very useful if you occasionally need a credit card and you're having trouble getting one due to a poor or limited credit history.

This type of credit card is backed by the cash deposit you make when you open the account. Yes, the process is essentially like giving yourself credit, but a card issued by a reputable bank also helps you build or rebuild your credit by reporting your on-time payments to the three major credit bureaus. Start your journey to improved credit by first learning how to choose a secured credit card.

Find the Right Secured Credit Card

The secured credit card market offers dozens of options these days, but that doesn't mean they are all worthy of consideration. It's essential to select the right card to ensure the terms are favorable and you reap the most benefits. After all, you're essentially spending your own money on the card, not the bank's. An ideal secured credit card should charge low interest rates, have reasonable annual fees — preferably no annual fee, but that's rare — and commit to reporting your credit status to the major credit bureaus each month.

Photo Courtesy: Philip Taylor/Flickr

It's also essential to give higher priority to secured cards that have a provision to convert your account to an unsecured credit card after a set number of months (usually six to 12) of timely payments or once you achieve an excellent credit score. Research cards thoroughly before applying to ensure you understand all the requirements and benefits.

Decide on a Security Deposit Amount

Most secured credit cards allow for different security deposit amounts, with most setting minimum deposits at $200 to $500 to secure a credit line of the same amount. Depending on your creditworthiness and the bank's policy, you may be able to deposit a higher amount to receive a higher credit limit. The Capital One Secured Mastercard sometimes requests a lower deposit amount of $49 to initiate a credit limit of $200 or more, but most card limits are equal to the deposit.

Photo Courtesy: @CapitalOne/Twitter

It's important to already have the security deposit on hand when you apply for a secured card, as you will be required to pay the full security deposit within a few days of approval. Thoroughly research the payment details and rules and make sure you understand them before applying.

Apply for the Card

Once you choose the secured credit card account you want to open, you can usually apply online, although in-person, phone and mail applications may also be available. An online application is likely to provide the fastest results for approval and account setup and will probably offer an option for making your deposit online as well. Once your application is approved and the process is complete, your secured credit card will be sent to your mailing address.

Photo Courtesy: Karlis Dambrans/Flickr

Be aware that in some circumstances, applications for a secured credit card may still be rejected, even though you are offering collateral. This is usually due to a very recent negative credit history, particularly if that history involves a bankruptcy that is less than one year old. Other factors could include a recent criminal history, especially if that history involved financial crimes related to banking.

Moving from Secured to Unsecured

Once you establish a good credit history, many secured credit cards automatically convert to a regular unsecured card after 12 to 18 months. If you make timely payments and pay your balance in full — an excellent credit building practice — or at least keep your balance far below the credit limit, you could request a review to convert your account in as little as six months.

Photo Courtesy: @Discover/Twitter

If your account doesn't automatically transition after a year and you're sure that you followed all the terms and conditions, you should contact the bank to discuss converting the account. If you prefer to explore other bank's credit card options at that time, you could also apply for a regular credit card on your own.

Why Secured Credit Cards Are a Good Option

According to financial experts, getting a secured credit card is an excellent financial move when you need to build new credit or rebuild damaged credit. Secured credit cards offer individuals with bad credit or no credit history at all a chance to start proving they can be financially responsible. These cards are even helpful after a bankruptcy, although some banks may require you to wait at least a year.

Secured credit cards can also serve as a starting point for obtaining other forms of credit. Unlike prepaid credit cards, they automatically report your credit history with them to the three major credit bureaus, which boosts your score as long as your card isn't at its limit. If your card can't be converted to an unsecured card — be sure to look for one that can! — you can close your account and get your security deposit back after you've achieved a good score and obtained other credit.