Approximately one out of three consumers has a below average credit score (FICO). Gaining access to credit can be difficult for those who are working to build new credit or rebuild their existing credit. But since you need access to credit to build a credit history, this can result in a frustrating catch-22 for many consumers. Secured credit cards can be an important tool, providing access to those who are traditionally not able to obtain credit.
Recognizing the important role secured credit cards play for many consumers, CardHub.com created a report to highlight several key features and policies from a variety of secured card issuers, including both large issuers and smaller banks. In this report we asked what it takes to obtain a secured card, how much it costs for those who carry a balance as well as those who don’t, and to how many of the three major credit bureaus the issuers report consumer payment activity (the key factor in helping consumers build or rebuild credit).
- Although issuers carry no risk of default (consumers must put down minimum deposit equal to credit line) and no cost of funds, annual costs for secured credit cards range from $0 to $106.
- The average annual cost for secured credit card customers who do not carry a balance is $27.
- The average annual cost for secured credit card customers who do carry a balance is $85.
- With no annual fee and a 8.99% APR, Navy Federal was the most affordable secured credit card both for those who carry a balance ($28) as well as for those that do not ($0).
- Compass Bank was the most expensive card for those who do not carry a balance ($40) and Bank of America and Capital One were the most expensive for those who do carry a balance ($106).
- 65% (15 out of 23) of the banks evaluated for this report offer secured credit cards.
- Since our last report in 2011, HSBC and Applied Bank have dropped their secured cards while SunTrust and BB&T have entered the secured card market.
- The average minimum security deposit required to open a secured credit card is $313 with a low of $200 and a high of $500.
- All of the issuers that provided information about their credit reporting policies report to all three of the major credit bureaus – Experian, Equifax and Transunion.
- Issuers are now offering more ways for consumers to apply for secured credit cards. 67% of issuers now allow online applications vs. 54% in 2011; 40% allow the customer to apply over the phone, compared with 23% in 2011; and 73% allow the customer to apply through a bank branch, compared with 77% in 2011.
- Minimum standards for secured credit cards generally include the following:
- A security deposit must be provided in order to open a secured account, although there is some variation in the form of the security deposit among banks. Some banks will allow the security deposit through cash or check, while others require that the applicant open a certificate of deposit, checking account, or savings account in the same bank that is tied to the secured credit card.
- The applicant must provide a Social Security Number (or Individual Taxpayer Identification Number) and all information on the application form must be valid.
- Applicant must not currently be involved in bankruptcy.
- Applicant’s monthly income must be equal or greater than their total monthly obligations, including the minimum payment on the card.
- Additional requirements may include:
- A review of the history of accounts with the institution where you are applying.
- Current delinquencies with other accounts be satisfied.
- Minimum annual income requirements (above and beyond the ability to repay test listed above).
- While most issuers that offer a secured credit card offer only one option US Bank, SunTrust and First Progress offer multiple secured card options.
|Issuer||Offer Secured Cards?||How to Apply||Requirements for Approval Beyond Minimum Standards||Annual Cost of Card without Revolving Balance||Annual Cost of Card with $300 Revolving Balance||Minimum Deposit||Major Credit Bureaus Reported to|
|Bank of America||Yes||Online, in branch||An applicant must have been out of bankruptcy for at least a year and have no current delinquencies on other accounts. Individual’s history of accounts with Bank of America will also be assessed.||$39||$106.28||$300||Experian, Equifax and Transunion.|
|BB&T||Yes||In branch||Eligibility depends on bad or no score history. If a customer does not qualify for a regular credit card, BB&T offers the option of a secured card.||$19||$60.3||$400||Experian, Equifax and Transunion.|
|BBVA Compass Bank||Yes||In branch||No recent bankruptcy filing or major derogatory credit, and no BBVA Compass charge off. Minimum of $9,000 in income.||$40||$92.89||$500||Experian, Equifax and Transunion.|
|Capital One||Yes||Online||Must not have a non-discharged bankruptcy or any delinquencies.*||$29||$106.18||$200**||Experian, Equifax and Transunion.|
|Citibank||Yes||In branch||Eligibility depends on credit history. Issuer did not provide specifics.||$29||$89.01||$200||Experian, Equifax and Transunion.|
|Fifth Third Bank||Yes||In branch||Eligibility depends on credit history. Issuer did not provide specifics.||$24||$105.31||$300||Experian, Equifax and Transunion.|
|First National||Yes||Online||No Specific Info Provided||$19||$78.11||$300||Information Not Provided|
|First Progress||Yes||Online, by phone||No minimum credit score. No Credit History Required. Any bankruptcy in credit history has been discharged.||$29||$77.50||$300||Experian, Equifax and Transunion.|
|Navy Federal||Yes||Online, in branch, by phone||You must be a member of Navy Federal Credit Union, serving Army, Marine Corps, Navy, Air Force, Coast Guard, Department of Defense civilian and contractor personnel, or a member of their family.||$0||$28.22||$500||Experian, Equifax and Transunion.|
|PNC Bank||Yes||In branch||Eligibility depends on credit history. Issuer did not provide specifics.||$36||$98.72||$250||Experian, Equifax and Transunion.|
|SunTrust||Yes||Online, in branch, by phone||Eligibility depends on credit history. Issuer did not provide specifics.||$29||$88.11||$300||Experian, Equifax and Transunion.|
|U.S. Bank||Yes***||Online, in branch, by phone||May be unable to approve application if credit history reflects a bankruptcy, or if you have defaulted on a prior loan or credit account with U.S. Bank||$35||$105.04||$300||Experian, Equifax and Transunion.|
|Union Bank||Yes||Online, in branch||No additional requirements beyond minimum standards||$19||$78.11||$300||Experian, Equifax and Transunion.|
|USAA Bank||Yes||Online, by phone||USAA Bank products are only available to military members, veterans who have honorably served, and their eligible family members and must meet underwriting standards. No other requirements provided||$35||$66.22||$250||Experian, Equifax and Transunion.|
|Wells Fargo||Yes||Online, in branch, by phone||Must not have unsettled liens. All Wells Fargo Credit Cards are subject to credit qualification.||$25||$87.72||$300||Experian, Equifax and Transunion.|
|RBS Citizens Bank||No||N/A||N/A||N/A||N/A||N/A||N/A|
* Other criteria for approval may apply.
**Some consumers with higher credit ratings may qualify for a lower minimum deposit
***US Bank offers several cobranded secured credit card options. Depending upon usage and rewards preferences, a lower annual fee might apply under a different US Bank secured credit card.
In this study CardHub.com reviewed 15 secured credit cards offered by the largest credit card issuers, as well as a few smaller banks that are active in the secured credit card space. We gathered the basic information for our report from the websites of each institution, and confirmed the information with each issuer with the exception of First National Bank, Barclays, GE Money, Citibank and BB&T. Despite multiple attempts to garner verification, these issuers did not respond, and the respective information, gleaned from the website and through their customer service lines, could not be definitively confirmed. All information contained in this report was current as of September 24, 2013.
We collected information regarding several key features and policies related to secured credit cards including the minimum standards required to apply for the card, the minimum deposit needed, the annual fee and number of major credit bureaus the issuers report to.
Some institutions offer more than one secured card option. In those cases, we reviewed the card with the lowest annual fee that was not cobranded with another company. We chose the annual fee over the APR percentage because to the extent possible, consumers should strive to pay off the balances on secured cards each month. Otherwise, you are essentially paying a high price to borrow your own money.
We assumed a $300 revolving balance and applied the purchase APR listed by the issuer to calculate the annual cost for revolving balances. We also assumed compounding daily interest.
The requirements for approval to obtain a secured card listed in this report may or may not be all inclusive. Other requirements may apply at application, depending upon the institution.
Some issuers only offer their products to specific segments of consumers. USAA Bank products are only available to military members, veterans who have honorably served, and their eligible family members. Navy Federal’s products are available to serving Army, Marine Corps, Navy, Air Force, Coast Guard, Department of Defense employees and their families.