2015 Secured Credit Cards Report

SECURED CREDIT CARDSRoughly one out of every three people has a below-average credit score. Not only do one’s monthly expenses rise as their credit score falls, but access to credit declines dramatically as well. This represents something of a Catch-22 for newcomers and those working to rebuild their standing, since a monthly influx of positive information from a responsibly managed loan or line of credit is the only way to either build a solid score from scratch or devalue negative credit report listings.

That’s why a secured card can be such an important tool. No matter how slim approval rates get for unsecured credit cards, or how much issuer competition exists, you can pretty much be assured of getting a secured card as long as you have at least $200 for the refundable security deposit. And since this deposit doubles as your spending limit, thereby preventing overspending and minimizing risk, issuers don’t need to charge much in the way of fees.

Recognizing the importance of secured credit cards as reliable, cost-effective credit building vehicles, CardHub took an in-depth look at the space in order to help consumers better understand the approval requirements, costs and credit reporting procedures of offers from issuers both big and small. Our findings, which reveal wide variation in the cost and key features of secured cards, are below.

Key Findings

  • Using a secured credit card can cost as much as $175 per year, despite issuers carrying no risk of default and little cost of funds (security deposits typically don’t accrue interest). This is largely attributable to a lack of comparison shopping as well as account mismanagement on the part of consumers.
  • Not revolving a balance is the best way to minimize secured card costs. Cardholders who do not carry a balance pay $25 on average, while those who do carry a balance pay $84.
  • Based on the assumptions used in this study, consumers who anticipate revolving a balance should avoid secured card offers from First Premier Bank, as they may be prove to be the most expensive. Those who feel confident they’ll always pay their monthly bill in full should in turn steer clear of Credit One Bank’s secured offer – the most expensive option for that usage profile.
  • Most of the issuers that provided information about their credit reporting policies report to all three of the major credit bureaus – Experian, Equifax and Transunion – on a monthly basis. The only exceptions are Agriculture Federal Credit Union and Western Sun Federal Credit Union, which report to Equifax.

 

Annual Cost of Secured Credit Card

 

  • Secured cards from credit unions cost far less to use than those from banks, both in terms of annual fees and the cost of revolving debt. However, they have much higher initial deposit requirements ($475 on average) than bank offers ($293).
  • With no annual fee and an 8.75% APR, Western Sun Federal Credit Union offers the most affordable secured credit card, whether or not you plan to carry a balance. Merrick Bank’s no annual fee secured card with a 17.45% APR is the best offer among banks.
Average Costs By Institution Type

 

  • Quite few business-branded secured credit cards are currently available, and these offers are more expensive than their personal counterparts. Since using a personal credit card does not increase a small business owner’s personal liability, applicants should consider both types of offers in order to find the best deal available at a given time.
Average Costs By Account Type

 

  • Credit unions don’t seem to have invested enough in their online presence, as they are less likely than banks to have online applications for secured credit cards despite dominating them when it comes to a consumer’s ability to apply in a branch and, to a lesser extent, over the phone.
Ways To Apply

 

Detailed Findings

 

  • 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). 
Issuer Type 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
Western Sun Federal Credit Union Personal Online and In Branch No recent bankruptcy filing or major derogatory credit information $0 $27.43 $500
Digital Federal Credit Union Personal Online, In Branch and By Phone Must open a DCU membership. Requires a $5.00 deposit into Primary Savings account. $0 $36.56 $500
Navy Federal Credit Union Personal Online, In Branch and By Phone Applying members can’t have any current bankrupt or delinquent NFCU accounts. 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, and their families. $0 $43.34 $500
ESL Federal Credit Union Personal In Branch and By Phone When you’re approved for an ESL Visa Secured Credit Card, your account is linked to an ESL Secured Savings account. Subject to credit approval $0 $45.94 $300
Merrick Bank Personal Online An applicant must have been out of bankruptcy for at least a year and have no current delinquencies on other accounts. $0 $57.18 $200
HeritageWest Credit Union Personal In Branch Not Provided $0 $58.75 $500
SouthWest Community Credit Union Personal In Branch Not Provided $0 $58.75 $500
Chartway Federal Credit Union Personal In Branch Not Provided $0 $58.75 $500
Agriculture Federal Credit Union Personal Online and By Phone No recent bankruptcy filing or major derogatory credit information $25 $73.19 $500
Zions Bank Personal In Branch and By Phone Annual Income must be Minimum $6000 $25 $74.38 $300
First National Bank of Omaha Personal Online and In Branch You must deposit $300 to open this account and must maintain a minimum balance of $300 in the account each day to obtain the disclosed annual percentage yield. $19 $78.11 $300
Union Bank Personal Online, In Branch and By Phone Minimum deposit of $300. Must have SSN or ITIN. Consumer must not have any unsettled liens $19 $78.11 $300
USAA Bank Personal Online When you apply – you’ll also be opening a USAA 2-year Certificate of Deposit (CD), an interest-earning deposit account that has a two-year term and a $250-minimum initial deposit. USAA Bank products are only available to military members, veterans who have honorably served, and their eligible family members. $35 $83.19 $250
First Choice Bank Personal Online Guaranteed Approval as long as your monthly income exceeds your monthly expenses by $100 or more. Bankruptcy is not a problem unless advised by your credit counselor to wait until bankruptcy has cleared or dimissed. There is no credit check to receive our secured card. $39 $84.04 $200
Capital One Personal Online and In Branch Must have a personal checking or savings account. Must not have a non-discharged bankruptcy or any delinquencies. $0 $84.79 $200
Capital Bank Personal Online Bankruptcy in your credit history has been discharged $29 $86.36 $200
Wells Fargo Personal Online Must not have unsettled liens. All Wells Fargo Credit Cards are subject to credit qualification. $25 $87.72 $300
U.S. Bank Personal Online, In Branch and By Phone We may be unable to approve your application if your credit bureau reflects a bankruptcy, if your Security Deposit is less than $300, or if you have defaulted on a prior loan or credit account with U.S. Bank $29 $91.72 $300
BBVA Compass Personal In Branch and By Phone Minumum deposit of $500 interest-bearing collateral savings account. No recent bankruptcy filing or major derogatory credit information, and no BBVA Compass charge off. Also, we require a minimum of $9,000 in income. $40 $92.89 $500
First Progress Personal Online Any bankruptcy in your credit history has been discharged, you successfully fund your security deposit, and you meet the government-mandated identity and income credit card requirements. $29 $95.36 $300
First Niagara Bank Personal Online and In Branch Must not have a current / open bankruptcy or delinquency. No Open Judgments or Tax Liens. No Prior 1st Niagara Charge off $50 $95.90 $500
OneUnited Bank Personal Online and By Phone Bankruptcy must be resolved $39 $98.11 $250
SunTrust Bank Personal Online, In Branch and By Phone Must have been out of bankruptcy for at least a year and have no current delinquencies. $32 $98.36 $300
Atlantic Stewardship Bank Personal Online Must have been out of bankruptcy for at least a year and have no current delinquencies. $35 $105.04 $300
Fifth Third Bank Personal In Branch $300 deposit into a secured Fifth Third savings account that earns interest. Applicants are subject to credit approval. You cannot have current delinquencies with Fifth Third Bank. Charged offs are considered paid off if it is sold to a collection agency. $24 $105.31 $300
Bank of America Personal Online and In Branch $300 minimum deposit. Generally, an applicant must have been out of bankruptcy for at least a year and have no current delinquencies on other accounts. We also look at the individual’s ability to pay and history of accounts with Bank of America. After 12 months, customers may qualify to have their security deposit returned and continue to use the account. $39 $106.28 $300
Commerce Bank Personal In Branch The consumer can’t be in consumer credit counseling or have an OFAC record. In addition they must pass “ability to repay” evaluation (Debt-to-Income ratio less or equal to 60%; must have income) $49 $109.01 $400
Credit One Bank Personal Online and By Email Must have been out of bankruptcy for at least a year and have no current delinquencies. $67 $136.71 $300
First PREMIER Bank Personal Online and By Phone Must not have unsettled liens. $45 $174.92 $150
Wells Fargo Business Online Must not have unsettled liens. All Wells Fargo Credit Cards are subject to credit qualification. $25 $87.72 $300
Metro Credit Union Business In Branch and By Phone Not Provided $45 $89.73 $500
BBVA Compass Business In Branch and By Phone Minumum deposit of $500 interest-bearing collateral savings account. No recent bankruptcy filing or major derogatory credit information, and no BBVA Compass charge off. Also, we require a minimum of $9,000 in income. $40 $92.89 $500

*Some consumers with higher credit ratings may qualify for a lower minimum deposit

Methodology

 
In this study CardHub.com reviewed 32 secured credit cards offered by issuers active in the secured credit card space. We gathered the basic information for our report from the websites and/or customer service phone lines of each institution and then attempted to confirm this data with them. The only issuers that did not verify this information by the required date were OneUnited Bank, HeritageWest Credit Union, SouthWest Community Credit Union, Chartway Federal Credit Union, Metro Credit Union, Agriculture Federal Credit Union, Western Sun Federal Credit Union and First Premier Bank. All information contained in this report is current as of August 20, 2015.

We collected information for 29 personal cards and 3 business cards regarding the following key features: approval requirements, minimum deposit, annual fee, APR and credit reporting procedures.

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. Where an account’s APR was presented as a range, we used the average. We also included the ongoing annual fee (excluding first-year introductory offers) where applicable.

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. For example, USAA Bank products are only available to military members, veterans who have honorably served, and their eligible family members.

Previous CardHub Editor’s Review: Chase Slate Credit Card      

Our content is intended for general educational purposes and should not be relied upon as the sole basis for managing your finances. Furthermore, the materials on this website do not constitute legal advice and should not be relied upon as such. If you have any legal questions, please consult an attorney. Please let us know if you have any questions or suggestions.