What are the Benefits of Secured Credit Cards?

Credit plays a major role in your financial opportunities, influencing everything from loan approvals to interest rates. And for individuals who want to improve their own credit standing, secured credit cards are one of the best ways to build credit. But why? Keep reading to explore the benefits of secured credit cards and how they can support your financial goals.

What are Secured Credit Cards?

Secured credit cards are your trusty sidekicks in building or rebuilding credit. Unlike traditional credit cards, which extend credit based on your creditworthiness, secured cards require a cash deposit upfront, which acts as collateral in case you default on card payments. This deposit acts as your credit limit. For example, if you deposit $500, your credit limit will be $500.

The upfront deposit also makes it easier to get approved—especially for people with no credit or bad credit. That’s because the issuer faces less risk since you have already “secured” your account with a financial safety net. Once you get approval, you use the card just like any other credit card: make purchases, pay your bill on time, and stay within your credit limit.

The best secured credit cards report your activity to the credit bureaus, helping you build your credit one purchase at a time. Think of it as leveling up in the credit game!

Benefits of Secured Credit Cards:

You might be wondering, are secured credit cards worth it? In order to decide, it’s important to weigh the pros and cons. Let’s start with the advantages of secured credit cards:

• Build Credit — The main purpose of a secured credit card is to help you build or rebuild your credit by reporting your payment activity to three major credit bureaus (Equifax, Experian, and TransUnion). This can gradually improve your credit score.
• Easy Approval — Secured credit cards are usually easier to qualify for because they require a cash deposit as collateral. This makes them accessible to people with poor or no credit history so they can start establishing their creditworthiness.
• Controlled Spending — Since your credit limit matches the deposit amount, you can spend wisely and avoid accumulating debt beyond your means. This gives you both financial stability and peace of mind.
• Transition to Unsecured — Many secured credit cards let you move to an unsecured card after you have shown responsible use. By always paying in full and managing your credit wisely, you might qualify for a card that doesn’t require a deposit (and also comes with added perks)!
• Teaches Financial Discipline — Using a secured credit card can help you build good credit habits, like making timely payments and keeping balances low. These practices are key to maintaining a healthy financial profile for the future.

Drawbacks of Secured Credit Cards:

Like any financial product, secured credit cards come with their own set of drawbacks to consider. While they can be a great tool for building credit, it’s important to weigh these potential downsides:

• Requires a Deposit — As mentioned, secured cards usually need a cash deposit upfront. Think of it like a safety net for the card issuer. However, this means you'll need to set aside some cash that might have been used for other things you enjoy or need, which can be a balancing act.
• Limited Rewards — One drawback of secured credit cards is their lack of attractive rewards programs. Unlike regular credit cards, which may offer points, cashback, or travel miles, secured cards have more limited offerings. This can make them less appealing for those looking to maximize benefits from their spending.
• Low Credit Limits — With secured credit cards, your credit limit is usually equal to the deposit you provide. This can feel limiting, especially if you need more spending flexibility for large purchases or unexpected expenses.
• Fees — Some (but not all) secured cards come with fees like annual fees, setup fees, or monthly maintenance fees. Don’t forget to check the fine print so you are not caught off guard by unexpected costs.
• Potential Negative Impact on Credit — Like any credit card, mismanaging a secured card can impact your credit score. It's like caring for a plant: without attention and regular care, it struggles and may wither. Missing payments or exceeding your credit limit can harm your credit, restricting future financial opportunities.

Where Can I Find the Best Secured Credit Card?

Secured credit cards can be a game-changer when it comes to building or rebuilding your credit. While they come with some drawbacks, the benefits outweigh the negatives, especially if you are focused to improving your financial standing.

If you are considering a secured credit card, the Credit Builder Secured Visa® Credit Card from Academy Bank is worth a look. Here’s why it's considered one of the best credit cards for building credit:

• Customizable credit limit (set your limit between $300 and $3,000)
• Automatic reporting to the credit bureaus (Equifax, Experian, TransUnion)
• Added security with EMV chip technology
• No application fee
• No over-the-limit fee
• No annual fee

Ready to take control of your credit? Apply now and start your credit-building journey with Academy Bank's Credit Builder.

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Need help making a game plan? Use our Credit Card Payoff Calculator to create a strategy for repaying your balance and Credit Assessment Calculator to evaluate your current credit health.

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Subject to credit approval. Transaction and Penalty fees apply. Credit Builder Savings account required. $5.00 quarterly fee charged to the Credit Builder Savings account if not enrolled in eStatements. Improved credit score is not guaranteed. Credit score is determined by credit reporting agencies based on multiple factors, but satisfactory performance on a credit card product can improve your credit score. Default on a credit card, including missed or late payments can damage your credit score. Once added, funds cannot be withdrawn from the Credit Builder Savings account and the Credit Builder Card without closing the savings account and the credit card.