I have no credit history and I want to apply for a credit card. I spoke to a manager at a bank about applying for one and explained my situation and he suggested applying for a secured credit card. What are secured credit cards and is this good advice?
A secured credit card is a card that requires you to put down a cash deposit as security. The credit limit for the account is usually the amount you put down as the deposit. For example if you put a deposit of $500 down then the credit limit on your secured card would be $500.
Once you close the account or the card issuer upgrades you to a non secured card the deposit is refunded – in some cases interest has also been added but this varies from card to card.
These are a good way to build or rebuild credit history, as they present little to no risk to the card issuer (if you don’t pay the money owing on a card they simply keep your deposit) there is usually no minimum credit score required.
Unfortunately these cards usually come with annual fees or high APRs, which is why it’s important you do some research before applying for a secured card. You should look for an account that has a low or no annual fee (this means when your credit does improve you can apply for a better credit card and keep your original secured card open to improve your length of credit history and average age of accounts).
[Read: Best Secured Credit Cards]