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Top 3 Ways Your Life Gets Better With a Secured Credit Card

A woman signing the receipt for her credit card payment while the waiter holds the card reader after finishing lunch at a restaurant.

Image source: Getty Images

Do you have less-than-perfect credit, bad credit, or no credit history? You might want to try a special kind of credit card that can help you build credit, called a secured credit card.

Many people might not know about secured credit cards or might feel like a secured credit card is “worse” than regular unsecured credit cards. But you shouldn’t feel bad if your credit score is not what you want it to be. You have options, and you can make progress to improve your credit score. Using a secured credit card can help make your life better in powerful ways.

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Let’s look at a few ways that your personal finances — and personal life — can get better with a secured credit card.

1. Secured credit cards help you build credit

This is the biggest, most important reason to get a secured credit card. Unlike typical credit cards where you have to apply and get approved based on your credit score, secured credit cards can help people who have a low credit score — or no credit history at all. Many of the best secured credit cards don’t require a credit check or don’t require a credit score to apply.

So if you’re recovering from a bankruptcy or other financial trouble that has hurt your credit, a secured credit card can help you get back on your feet. Or if you’re new to the U.S., just getting started in your career and adult life, rebuilding credit after a divorce, or otherwise needing to build credit history, a secured credit card can help you get your foot in the door with the financial system — and put you on track for better times ahead.

2. Secured credit cards often have lower fees

If you’re trying to build credit, you might be nervous about signing up for a traditional credit card. Many people worry about late payment fees, interest charges, and other unexpected costs of using a credit card.

In general, secured credit cards come with lower risks for your bank account. The best secured credit cards often have cash deposits, so you cannot spend more than the amount of cash you put on your card upfront. This helps you avoid the usual credit card drawbacks of running up a big balance and getting charged interest. And unlike some of the best travel credit cards, most secured credit cards do not charge annual fees.

Secured credit cards can still charge interest if you don’t pay off your balance in full before the payment due date. But the amount you can rack up might be smaller with a secured credit card — some will let you open an account with a cash deposit of as little as $200.

3. Some secured credit cards pay rewards

Would you like to get in on the fun and cost-savings of reward credit cards? Some of the best secured credit cards even pay rewards on spending, like 1.5% unlimited cash back on all purchases, extra cash back on restaurants and groceries, or bonus cash back on travel purchases.

Secured credit cards don’t have to feel like a punishment or a limitation. You can have fun with these cards and earn valuable rewards, just like with an unsecured rewards credit card.

Bottom line

Don’t feel bad about needing to use a secured credit card. It might be just what you need right now to get your credit back on track. Putting in some time and effort on a secured credit card can help your credit score get back to the level you want. The best credit card companies can even support you along the way with free credit scores, credit monitoring tools, and “graduation” to an unsecured credit card if you qualify.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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