We’ve put together a list of the six best secured credit cards to build credit with on the market in 2021. We have also ranked them on multiple factors, including their effectiveness, costs, and accessibility.
Citi took the crown as the “Best Overall” secured credit card to build credit, but the others mentioned here are also worth considering.
The Best Secured Credit Cards to Build Credit in 2021:
- Citi Secured Mastercard (Best Overall)
- Bank of America Customized Cash Rewards Secured
- Discover It Secured
- Self Visa
- Chime Credit Builder
- Petal 1
Compare The Best Secured Credit Cards to Build Credit
|Credit Card Provider||Credit Tier||Variable APR on Purchases||Annual Fee||Free FICO Score Provided||Minimum Cash Upfront Required||Refundable Security Deposit|
|Bank of America||1st||23.99%||$0||Yes||$300||Yes|
|Petal 1||3rd*||19.99% to 29.49%||$0||No||$0||N/A|
*Most likely; since these companies are newer than the traditional credit card companies, their tiers aren’t well known.
How We Ranked These Cards
First and foremost, we ranked the best secured credit cards below on their ability to build your credit. Contrary to popular belief, not all credit accounts have the same impact on your score.
Credit scoring models rank each bank and credit union into tiers. If you use a card from one ranked the highest in a way that improves your score, you’ll receive the full benefit.
However, if you use a card in the lower tiers the same way, you’ll only receive a percentage of that benefit.
Here’s how the tiers break down:
- First Tier: 100%
- Second Tier: 80%
- Third Tier: 60%
- Fourth Tier: 40%
For example, imagine that you qualify for a credit card in the second tier. You make your payments on time and in full for three months. Hypothetically, say that should improve your score by 25 points.
Because you’re using a card in the second tier, you’ll only receive 80% of that improvement, which equals 20 points. Because of this, we highly suggest using a secured card from the top tier whenever possible.
Next, we considered each card’s annual fee, interest rate on purchases (not on a balance transfer or cash advance), security deposit policies, and credit score monitoring services.
We made sure to only select cards that report to each major credit bureau so you don’t have to worry about that with any of the following cards.
What to do with this information: If you’re trying to build credit and you don’t already have three credit cards, we recommend that you apply for the ones that you like on this list.
For maximum credit building effectiveness, you want to be making monthly payments on three credit cards per month. If managed correctly, you should see your credit scores go up quickly!
Citi Secured Mastercard (Best Overall)
The Citi Secured Mastercard is our pick for the best secured credit card to build credit with in 2021. Most importantly, it belongs to a first-tier bank, which means you’ll receive the full benefit of your credit-building activities with it.
If you want to build credit with a secured card, getting an account in the first tier should be your top priority. Otherwise, you’ll greatly diminish the return on your efforts.
Citi, Bank of America, Chase, and Wells Fargo are the only banks in the first tier. Unfortunately, neither Chase nor Wells Fargo offers secured cards in 2021, which leaves you with Citi and Bank of America.
Citi’s card wins out over Bank of America’s primarily because of its lower minimum cash deposit. Saving up enough money for a secured credit card can be a significant obstacle for many potential borrowers, and Citi’s is 33% lower than Bank of America’s.
In addition, Citi has a slightly lower APR, though that should hopefully never come into play. Make it a priority to pay off your credit card balances each month to avoid interest charges.
The Downside: All of the secured credit cards on this list that require a security deposit will refund it eventually, but it can be harder to get some back than others.
Citi seems to be one of those that are less inclined to hand back your deposit. They’ll hold it in a Collateral Holding Account for an initial term of up to 18 months with no interest. Some others will review you for a refund as early as eight months or so.
Bank of America Customized Cash Rewards Secured
Bank of America (BoA) is the only bank besides Citi in the first tier with a secured credit card available in 2021. In fact, they have several secured cards available, but their most attractive offer is the Customized Cash Rewards card.
Though Citi’s offering has a lower minimum cash deposit and APR, BoA’s card lets you earn cash back while you’re building credit. It includes the following rewards:
- 3% cash back in a category you choose from their options, including gas, online shopping, dining, and travel.
- 2% cash back at grocery stores and wholesale clubs.
- Unlimited 1% cash back on all other purchases (the 3% and 2% cash back categories are only for the first $2,500 in spending per quarter).
Secured credit cards aren’t usually known for their rewards, so Bank of America’s offer is generous, especially since there’s no annual fee.
In addition, they’ll periodically review your account and overall credit history to see if you qualify for an upgrade to an unsecured credit card.
Once you do, they’ll return your deposit. You can get it back even faster if you have additional accounts open with them in good standing.
The Downside: The most significant downside to Bank of America compared to Citi is that their minimum deposit is higher. Many people with bad credit already struggle with debt payments, and scrounging up another $100 can be a pain.
There’s also a higher interest rate on purchases, which can be costly. While you should always do your best to avoid interest, it does happen. 40.5% of people with credit cards let their balances carry over from month to month.
Discover It Secured
Discover and American Express are some of the most famous financial institutions in the second tier. Unfortunately, American Express doesn’t have any secured credit cards open to new applicants in 2021, which leaves Discover as their major alternative.
Fortunately, Discover’s card has no annual fee and offers some decent cash back rewards, including the following:
- 2% cash back at gas stations and restaurants up to $1,000 in combined quarterly purchases.
- Unlimited 1% cash back on all other purchases.
- Automatic dollar-for-dollar match on all the cash back you’ve earned at the end of the first year.
To qualify, you’ll need to put down a security deposit of at least $200. After eight months, Discover automatically starts reviewing your account each month to see if you qualify to get your deposit back.
If you do, they’ll upgrade you to an unsecured card. They base their reviews on your credit management across all your credit accounts, not just the ones with Discover.
The Downside: The only significant issue with Discover is that it’s a second-tier credit card. You’ll get 20% fewer points than you would for good behavior with one from Citi or Bank of America.
The Self Visa credit card is technically a secured card, but it doesn’t require a traditional security deposit. It functions in conjunction with Self’s credit builder loan.
Credit builder loans are like inverted installment loans. You don’t get any cash upon approval. Instead, they put the loan proceeds in a savings account. As you make payments, you gradually earn the funds by paying down the principal.
Self’s secured card uses the savings you’ve accumulated in their credit builder loan as collateral. You can only qualify if you’ve paid down the principal by at least $100, and made at least 3 on-time credit builder loan payments.
If you meet that requirement, you don’t have to worry about being approved. They’ll let you open the account automatically without even checking your credit. It’s a great way to get around the minimum security deposit requirements if money is tight.
When you combine the revolving account with the installment debt, you diversify your credit mix, which only helps you build credit faster.
The Downside: Self’s requirement that you take out their loan to get their secured card is a double-edged sword. On the one hand, it means you never have to worry about getting denied, and you don’t have to put down a cash deposit.
It also means you have to take on an additional monthly payment and stick with it for a while. It takes several months to pay down a Self loan by $100, and you’ll pay a significant amount of interest.
In addition, the Self Visa is probably a third tier credit card. (We’re not 100% certain, since it’s a fairly new card.) That means you’ll only get 60% of the benefit you’d get from a secured card that Citi or Bank of America issued.
Finally, you don’t get to see your FICO score with Self, though they’ll give you access to your VantageScore 3.0.
Related Article: Self Credit Card Review
Chime Credit Builder
Chime is unique among the other cards on this list in several ways. Most importantly, the security deposit functions differently than it does with the others. It’s more like a prepaid credit card.
Instead of supplying a single cash deposit upfront, you add money to the account at the beginning of each month. It can be any amount, even nothing if you want.
Once you put up the deposit, the cash is locked in, and you can make purchases like you would with a prepaid card or debit card. At the end of the month, the card automatically pays off your balance using the deposit.
For example, say you decide to put down $300 into the account at the beginning of January. You could spend up to $300 on the card throughout the month, and then it would automatically apply your cash to the balance.
At the beginning of February, you could put down $150, and the process would repeat itself. The deposit system guarantees that you never miss a payment, which means you’ll never accrue any interest on your balances.
There are no fees either, and you don’t have to go through a credit check to apply.
The Downside: Like Self, the primary downside to Chime is its tier. You’ll only see 60% of the benefit to your credit as you would with a first-tier account.
In addition, Chime seems to have more customer complaints than more well-established banks, but most are about the company’s checking accounts.
The Petal 1 card isn’t technically a secured credit card, but it’s another viable option for someone with bad credit looking to improve it.
Petal doesn’t check your creditworthiness through traditional means. Instead of pulling your credit report and checking your score, they review your bank account activity and use it to create what they call a “Cash Score.”
It measures your creditworthiness based on the income, saving, and spending history from your checking account. As a result, Petal can approve more people with better rates, even if they have no credit history.
The credit card issuer offers two cards, but the Petal 1 card is easier to qualify for than the other. It’s for people with “low-to-fair credit or cash flow who are seeking to improve their credit score”.
It has no annual fees and available credit limits are between $500 and $5,000. That’s significantly higher than most people can afford to put down on a secured credit card account.
In addition, it offers cash back between 2% and 10% at various merchants in your area.
The Downside: Once again, the most significant issue with the Petal 1 card is its tier. You can’t build your credit as efficiently with it as you would with a card in the first or second tier.
They also provide you with your VantageScore 3.0 instead of your FICO score, which is less popular among lenders. Otherwise, there’s not much to complain about, though you can get better rewards and benefits elsewhere if you have a good credit score.
Who Can Be Approved for a Secured Credit Card?
The approval requirements vary between secured credit cards, but they’re generally less strict than the requirements for unsecured cards. People with subprime credit or no credit history are still eligible for many of them.
To qualify, you’ll also need to provide a cash security deposit. It’ll serve as collateral and protect the lender if you default, which is why the cards are easier to access.
The amount you deposit also becomes the limit on your credit card. Many have a minimum requirement of around $200 or $300.
How Much Do I Have to Deposit on my Secured Credit Cards?
There is no universal minimum deposit for a secured credit card. Each credit card provider is free to set their own requirements.
However, you’ll usually need to put down at least $200 to $300 to qualify for most cards. Keep in mind that your deposit usually becomes your personal credit limit, and if it’s too low, it’ll be harder to keep your credit utilization ratio at appropriate levels.
What’s the Difference Between a Secured Credit Card and a Regular Credit Card?
To qualify for a secured credit card, you have to provide a security deposit that serves as collateral to protect the card issuer. A traditional credit card, or an unsecured card, won’t require you to give the issuer a security deposit.
Because of the cash collateral, secured credit cards are easier to qualify for than unsecured cards. Your deposit sets the credit limit on your card, which protects your lender if you ever default on the account.
In most cases, you can get your security deposit back from your lender once you’ve made your monthly payment on time for about a year. Some card issuers review you for it automatically, but you may have to ask others to initiate the process.
How Do I Apply For a Secured Credit Card?
Applying for a secured card is usually no different than with a traditional credit account. You supply the credit card company with details like your name, Social Security Number, and income.
You’ll also need to be over 18 years old with a U.S. address, and even though their standards are lower than average, most still require a credit check.
The secured credit card issuer will pull your credit report, and if you fit their profile, they’ll approve you for the account. Once they do, you’ll fund your deposit and get your card.
How Do Secured Cards Help You Build Credit?
Secured credit cards help you build credit by giving you an opportunity to make monthly payments on time and in full, thus improving your payment history. That’s the most significant factor in your FICO score, accounting for 35% of your credit rating.
That doesn’t mean you have to pay your balance off each month. You can get away with making your minimum payment. However, it’ll be much more expensive that way.
Additionally, a secured card can help you diversify your credit mix if you don’t have a card yet. It’s best to have both installment and revolving debt accounts.
Can You Get Turned Down For a Secured Credit Card?
Secured cards generally have lower credit requirements than unsecured cards, but you can still get turned down for most of them.
Many secured cards are for people with fair to poor credit, but some are only for those with no credit history. If you’ve already made mistakes with credit accounts, these types might turn you down.
Alternatively, if your income is too low, you won’t be able to afford your monthly payments, and the card issuer might deny you. An inability to afford the security deposit would result in the same.
Can You Get Your Deposit Back?
Many secured credit cards eventually refund your security deposit. They may decide to upgrade your account to an unsecured card after you demonstrate responsibility with your account by making your payments on time and in full for a while.
That period is somewhere between eight months and a year and a half. Check your credit card provider’s terms to figure out the timeline.
If you’ve made all your payments on time for the agreed-upon period, you can request that they review you for an upgrade.
Alternatively, you can get your deposit back when you cancel your account. Be aware that if you have an outstanding balance at the time, they’ll take it out of your deposit. And cancelling your credit card will probably have a negative impact on your credit.
Nick Gallo is a Certified Public Accountant and content marketer for the financial industry. He has been an auditor of international companies and a tax strategist for real estate investors. He now writes articles on personal and corporate finance, accounting and tax matters, and entrepreneurship.