Since 2008, many consumers have found themselves in a bind when it comes to getting credit, and then once they get the credit, they find it hard to pay off their balances. In 2010 alone, credit card issuers had to charge off 11 percent of bank accounts. A charge off occurs when a consumer is six months or more behind on their payments, the credit card issuer then sells the information to a debt collector, and then the debt collector collects the payment. In 2011, charge offs have decreased, and are currently around six percent of bank accounts. Even still, some consumers still are having a hard time accessing credit due to prior mistakes.
Having a good credit card and a good credit score is important when looking for new credit cards, as well as auto insurance policies and home mortgages. If you have bad credit, try starting out with a secured credit card. Secured credit cards provide a viable alternative to traditional unsecured credit card. With secure credit card, you will be required to put down a security deposit which is the equivalent of your spending limit on the credit card. If you default on a payment, the issuer will just take it out of the security deposit that you put down upfront. Not all secured credit card issuers are gold; make sure they report your payment information to the one of the three major credit reporting agencies - Experian, TransUnion and Equifax, so it can enhance your credit score.
Here are our top three picks for secured credit cards:
- Orchard Bank Classic Visa and Classic MasterCard
- Capital One Secured MasterCard
- Citi Secured Card
A very popular credit card, the first years' $35 annual fee is waved for new customers. Also, the card offers a 7.90 percent APR, and a 21 percent cash back APR. Use this card if you have a lot to deposit and not very many purchases to make.
If you have a little bit of a good standing with the credit card issuers, this may be a good card for you. The Capital One Secured MasterCard is known to give you a little bit of a higher credit limit than the deposit you put down. This card has an APR of 24.9 percent, so we recommend putting money down to secure the card, but being very frugal about transactions.
This is a really good card. Citi cardholders have to make 18 months worth of steady payments and then Citi will consider you for one of their unsecured credit cards. Their secured credit cards have an interest rate close to 18 percent, and a $29 annual fee.
As always fees are subject to change, please call up your credit card issuer if you are interested in a secure credit card.