What do I need to know about secured CC's?

[Anonymous]

After posting my troubles in the "Rebuilding Your Credit" section, it seems that getting a secured card might be the best bet for getting us back on the "credit radar" (we've been living without debt for a couple of years now, and therefore have dropped off the grid).  I'm somewhat worried that I don't know what I don't know, and don't want to end up making the situation worse!

What do I need to look for while shopping for a secured CC?  What do I need to be cautious of while reviewing the various CCC's?

Are there CCC's that I should avoid like the plague?  Any that you particularly recommend?

What are the benefits & pitfalls of using a secured card?

[jenrette]

Never pay monthly service fees for secured CC's as you will be using your own money.

[llecs]

Higher CLs begat higher CLs. In other words, when your credit improves to a point where prime CCs are knocking at your door, a reported higher limit CC would result in getting more higher limit CCs. Also know that higher CL CCs don't equal higher FICO scores. It's how you use the utilization on that card that matters. Ask around and make sure any secured CC you seek gives the option to unsecure in the future.

[Anonymous]

In general, Secured cards are just a good as unsecured for use and FICO scores.

Credit Unions are good places to get them. 

Major Banks have good ones, depending on your credit problems, you may or may not qualify.

Wells Fargo

US Bank

Bank of America

Citi

HSBC/Orchard

Public Saving Bank is good if you don't qualify elsewhere.  It does not unsecure, but no annual fee. 

Read terms and conditions carefully,  

There are some cards that are worse than the plague.  Completely outrageous fees and terms.   

Post who you are considering before applying. 

[LisaPA]

I think most people would not recommend HSBC/Orchard if you can get something better--they typically do not give credit limit increases and charge annual fees on limits of $200-$500. If you merely have a thin credit file, you should be able to get something better. If you have a really negative credit history, it may be necessary, but I would strongly recommend trying elsewhere first.

I would also try to get an unsecured card first and treat secured as a backup plan. I was able to get a Capital One card with a $1500 limit even with 120 day lates on my reports within the previous 2 years. They have a pre-qualifier page (soft pull) where you can see if they are likely to give you a card. It's not a guarantee, of course, but it's a start--they have cards specifically for people with "limited credit". If nothing comes up, then you might be better off going secured. The only negative is CapOne pulls all 3 reports.

Bank of America also has a pre-qual page.

I had a BofA 99/500 secured--the only problem for me was the low limit--it's hard to juggle using it while keeping your utilization low. The advantage of a fully secured card (if you have the cash) is that you can set your limit as high as you can afford. Secured cards don't look any different on credit reports.

Good luck!

[Anonymous]

When you are getting close to deciding one bank is who you want to go through for secured, just look a little bit longer. I was so close to signing and opening a secured card at BOA, after a month of searching online for the best deal, before I found Digital Federal Credit Union. My husband has a car loan through them, but I completely forgot about them until I saw they had the lowest interest rate advertised on a site I rarely search for bank/cds/loans, etc. Sure enough, went over to DFC online and found they have no annual fee, low interest, and other little benefits that wouldn't rip you off. So just look around and really compare. Even if you plan on paying in full every month. I'm currently planning on saving to open one with them, with a higher CL then I would have with BOA.