A secured credit card may be just what you need to start building or improving your credit health.
If you’ve been turned down for unsecured credit cards because of a lack of credit or a poor credit score, a secured credit card may be just what you need.
Secured credit cards usually require a security deposit to open an account and get issued a credit limit. This deposit lowers the risk the credit card issuers take on when they send a card to someone with poor credit. Because of this, if you don’t qualify for a traditional credit card, you might still be approved for a secured card.
How to use a secured credit card to start building credit
Once you have a secured credit card, you can start proving your creditworthiness by making your payments on time and keeping your credit utilization ratio low.
If you want to get started and open a secured credit card, here’s why you may want to consider the Capital One® Secured Mastercard®.
- The rundown: Everything we like about Capital One® Secured Mastercard®
- Heads Up: What you should consider before applying for Capital One® Secured Mastercard®
- Do the math: How to get the most out of Capital One® Secured Mastercard®
- The competition: How Capital One® Secured Mastercard® stacks up against similar cards
- Bottom line: Is the Capital One® Secured Mastercard® right for you?
Building your credit with a secured credit card may be a smart move, but not all secured credit cards are created equal. That said, the Capital One® Secured Mastercard® has quite a few positive attributes that could win you over.
A chance to build your credit health
Capital One® Secured Mastercard® gives you an opportunity to prove your creditworthiness when you might not qualify for a traditional credit card. Because the card is secured, you’ll have to put down a security deposit.
LaToya Irby, credit expert and owner of CreditRodeo, states, “The exact security deposit depends on Capital One’s assessment of the person’s credit history.” The minimum security deposit to open your credit card will be $49, $99 or $200 for a $200 credit limit. Before your account opens, you may deposit up to $1,000 to receive a higher initial credit line.
Automatic consideration of a higher credit limit
Once you prove yourself, Capital One may give you a bit more wiggle room when it comes to your credit limit. “Capital One considers the cardholder for a credit limit increase after they’ve made the first five monthly payments on time,” Irby says.
Want proof? Capital One® Secured Mastercard® cardholder Monique Andrews says, “They raised my limit after six months of on-time payments, which I wasn’t expecting.”
Note that automatic consideration of a credit-limit increase is a pretty big deal. Other card issuers may eventually increase your credit limit, but usually they require you to request one. Secured credit cards may require a larger deposit to increase your limit or charge a limit-increase fee.
Platinum MasterCard® benefits
Not all secured credit cards come with extra benefits. Issued as a Platinum MasterCard®, Capital One® Secured Mastercard® offers extended warranties, auto rental insurance, travel accident insurance, 24/7 roadside assistance and travel assistance services as well as price protection.
Pick your own due date
Capital One gives you the chance to pick your own due date, making it easier than ever to make sure you’ll be able to pay the balance due on or before your due date.
No annual fee
While some secured credit cards require an annual fee, Capital One® Secured Mastercard® does not.
Of course, Capital One® Secured Mastercard® won’t be a perfect fit for every situation. Here’s why you might want to check out other secured credit card solutions before you apply.
High interest rate for purchases
The interest rate for purchases, a variable 24.99 percent APR, on this secured credit card is steep. Luckily, not everyone will end up paying interest on their purchases. Irby explains, “Cardholders can avoid paying interest on their balances by paying in full and on time each month.”
No way to earn rewards
While many unsecured credit cards offer ways to earn cash back or rewards, most secured credit cards do not. Unfortunately, Capital One® Secured Mastercard® sticks with the majority of secured credit cards and does not offer rewards on purchases.
Low initial credit limits
If you stick with the minimum security deposit, you’ll only have an initial $200 credit limit, which can be quite restrictive.
Capital One only allows you to have up to a $1,000 initial credit line by putting down a $1,000 security deposit before your account is opened. Even at $1,000, these low credit limits may make it difficult to put larger purchases on your card to take full advantage of the Platinum MasterCard® benefits.
You must meet requirements to be approved
Even though you’re applying for a secured credit card, you may still be denied. “In their disclosures, Capital One says they won’t approve applicants whose monthly income doesn’t exceed their rent by at least $425,” Irby says.
Read the fine print in the disclosures and the terms and conditions to make sure you minimize the likelihood of getting denied.
Capital One® Secured Mastercard® should be seen as a great tool to help build your credit that doesn’t charge an annual fee. To get the most out of the card, you’ll need to use the card in a responsible manner.
Since building credit is the goal, you should make sure that you never charge more to your card than you can afford to pay off. Making on-time payments and keeping your credit utilization ratio low are two keys to building your credit.
To make life easier, make sure to take advantage of the opportunity to select your due date. Pick a date that gives you the best chance of having cash in the bank to pay your statement balance off in full.
Making five on-time monthly payments allows Capital One to automatically consider you for a credit-limit increase. A higher credit limit will result in a lower credit utilization ratio, assuming you charge the same amount on your card each month.
Even though your main focus may be building your credit, it doesn’t hurt to responsibly take advantage of the other benefits this card offers.
Extended warranties, auto rental insurance and travel accident insurance can save you money if you put these purchases on your card. Just make sure you’re not putting a large purchase on your card you can’t pay off.
|primor® Secured Visa Gold Card||Has a 9.99 percent fixed purchase APR|
|USAA Secured Card® Platinum Visa®||Earn variable interest on the balance of the two-year CD you’ll open when you apply|
|Discover it® Secured Credit Card||Earn cash back on your secured credit card purchases|
primor® Secured Visa Gold Card
From our partner
The primor® Secured Visa Gold Card offers a low fixed 9.99 percent percent APR on purchases. It also gives you the option of a higher credit limit. The card comes with an initial credit limit of up to $5,000 depending on your deposit.
On the other hand, the card has many fees — including an annual fee of $49, a credit-limit increase fee of up to $49, an upgrade fee of up to $49 and a reinstatement fee of $29 — which may offset the lower interest rate.
USAA Secured Card® Platinum Visa®
From our partner
The USAA Secured Card® Platinum Visa® uses a two-year, variable Annual Percentage Yield certificate of deposit (0.54 percent APY as of September 2017) for your security deposit, allowing you to earn interest on the balance of the CD. Credit limits range from $250 to $5,000 depending on your certificate of deposit balance.
Unfortunately, this card charges a $35 annual fee and has variable APR rates that range from a variable 10.90 to 20.90 percent on purchases.
Discover it® Secured Credit Card
The Discover it® Secured Credit Card offers cash back on purchases, a rarity for secured credit cards. You’ll earn 2 percent cash back at restaurants or gas stations on up to $1,000 in combined purchases each quarter (then 1 percent) and 1 percent cash back on all other purchases.
You don’t want to carry a balance on this card, though, as it comes with a 23.99 percent variable APR on purchases.
Deciding whether Capital One® Secured Mastercard® is a good fit for your wallet or purse comes down to how you plan to use the card.
If you plan to use the card solely to build your credit, then Capital One® Secured Mastercard® is likely a great fit. The card has an annual fee of $0, and Capital One will consider a credit-limit increase with just five on-time monthly payments.
If you think you may need to carry a balance, this card probably isn’t the best fit. Other cards may be able to offer you lower rates.
Issued as a Platinum MasterCard®, the card is widely accepted and offers many additional useful benefits that other secured cards may not offer, including travel and extended warranty benefits.
However, if you prefer to earn rewards or plan to carry a balance, you should consider other secured credit card options that may better fit your situation.
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