For most people, credit cards have become essential for daily activities. In addition, using a credit card will often help you increase your credit limit and credit score relatively quickly.
There are different types of credit cards. They include:
- Partially secured credit cards
- Secured credit cards
- Small business credit cards
- Store credit cards
- Credit cards for students
- Regular credit cards/charge cards
In this article, we will take a closer look at partially secured credit cards.
What Are Partially Secured Credit Cards?
Partially secured credit cards feature a higher credit limit than the refundable security deposit that the issuer holds as collateral.
A good example is the Secured MasterCard from Capital One, which can be classified as partially secure. It requires a minimum deposit as low as $49 while having a credit limit starting at $200.
Having a partially secured credit card means that the credit card company cannot fully guarantee that the cardholder will pay if they reach the credit limit on the card. This is why most credit cards are not partially secured from the start and provide limited credit.
It is, however, common for most secured credit cards to become partially secured after a while. This often happens when the credit card issuer gives the cardholder a credit limit increase.
Other credit card issuers may deposit a reward to the credit cardholder for always paying on time.
How Do You Qualify for a Partially Secured Credit Card?
If you are approved for a secured credit card, the initial security deposit, in most cases, is the same as your credit limit amount. This means that if you miss payments, the credit card company will use the deposit as collateral.
If you consistently use the secured credit card while making your payments on time, your credit card company will, in most cases, upgrade you. Your card now becomes partially secured by the company increasing your credit limit while not raising your initial deposit. This is how your credit card becomes partially secured.
In most cases, you will only qualify for a partially secured credit card after having an excellent track record with the secured credit card.
How Do You Build Credit with a Credit Card?
If you are looking to improve bad credit or build your credit profile, credit cards are the most effective tools available. If you use your credit card diligently, you will be able your build your credit effortlessly.
Here are a few tips you can use to build up some credit using the credit card you have in your wallet:
Pay Your Bills On Time
When you pay your bills late or miss payments, it always hurts your credit. Make sure that you pay your bills on time or even before they are due. If you are the type of person who tends to forget about due dates, make sure you set up auto-pay or have reminders on your calendar to always pay at least the minimum payment on schedule.
Make Sure Your Balance Is Always Low
Keeping your balance low positively affects your credit standing; this is referred to as the credit utilization ratio. The credit ratio is simply the amount you use from your card at any time. It is advised to use less than 30 % of the total credit limit you have available for your credit score not to suffer. Make sure your balance is kept to a minimum, or avoid having a balance at all to have a strong credit score.
Always Keep Your Accounts Active
Also factored into your credit history is how long you’ve had your accounts, as well as the condition they are in. For example, if you get a card and keep using it while making payments on time for many years, it will increase your credit score. It is wiser to have your credit card partially secured in most cases because it has more favorable terms when compared to a secured credit card.
What Are Other Ways of Building Credit?
Partially secured credit cards are a great way to build your credit, but they are not the only way. Here are other great ways to build your credit:
Get a Fully Secured Credit Card
If you need to build your credit, the best route to take is to get a fully secured credit card. It is important to note that any card you get provides a credit report of your payments to either of the three major credit reporting bureaus. This will assist you with building good credit.
These bureaus include:
Once you have consistently built a great reputation with either major credit bureau, you will create a great credit score.
Get Added as An Authorized User
This is a great option if you have a close friend or relative with excellent credit. They can have you added as an authorized user on their credit cards. You will get another credit card linked to their account, where the primary cardholder will review your card activity and be responsible for the payments.
It is important to note that not all credit card issuers or their credit reporting agency include authorized users in their credit reports to the bureaus. If they do, it is a great chance to use the card activity to build your credit score.
Also, remember if there is any negative activity with any of the cardholders, it will look bad on both of you. Make sure you make this arrangement with a person you trust.
Get a Credit Builder Loan
A credit builder loan is another great way to create a good credit history. Getting this loan is also a great way to save some money at the same time. A credit builder loan is usually available through a credit union or by small banks with no initial deposit. Once your loan is approved, instead of depositing the sum to your account, the lender performs a balance transfer from your loan payments into your savings account.
You repay your loan in the said increments, and the credit bureaus receive a credit report of these payments to help improve your credit rating and improve bad credit. At the end of the loan term, you will receive your total amount, plus the interest accrued in the savings account.
The Best Partially Secured Credit Cards Available
Here is a list of some of the best partially secured credit cards on the market:
The Petal® 2 Visa® Credit Card
The Petal 2 Visa Credit Card is ideal because of its low fees. It comes with no annual fee, late payment fees, returned payment fees, or any other fees. This is a great feature for any card and especially for a partially secured card. It is important to note that The Petal® 2 Visa® Credit Card might not have any fees, but it still charges a variable APR.
Deserve Pro Mastercard
The Deserve Pro Mastercard is a great restaurant and travel reward card. You will get 3% on any travel purchases and 2% cashback on any dining purchases. It is important to note that this cashback only applies to the first $500 of the purchases made for every billing cycle. You also get a 1 % cashback on all other purchases.
Capital One Platinum Credit Card
With the Capital One® Platinum Credit Card, you get an increased credit limit in just six months. The fast credit limit increase is a great motivation for you to pay your bills on time. It is important to note that if you keep spending at the same rate after getting the higher credit limit, your credit utilization rate will improve, which will help improve your credit score.
The Capital One Platinum Credit Card does not have an annual fee or a foreign transaction fee. In addition, you will get extra benefits such as travel accident insurance and extended warranty coverage on some purchases.
Capital One QuicksilverOne Cash Rewards Credit Card
With the Capital One QuicksilverOne Cash Rewards Credit Card, you will get unlimited 1.5% cashback on all purchases. This is a very impressive card that is available for applicants with a fair credit score.
Credit One Bank Platinum Visa for Rebuilding Credit
The Credit One Bank Platinum Visa for Rebuilding Credit is ideal for improving a bad credit score directly through the Credit One Bank website. In addition, the issuer offers you the chance to see if you prequalify for the card before you even apply.
- It offers a soft credit check that will not affect your credit score
- Note that prequalification does not guarantee eventual approval
With the Credit One Bank Platinum Visa for Rebuilding Credit, you will earn a 1% cashback on all purchases while still building your credit. It also comes with regular reviews of your account to see if you are eligible for a credit limit increase.
The cards mentioned above are ideal for applicants with a limited, average, or poor credit history. When looking for the perfect partially secured credit card, make sure that you get one with the lowest fees and a suitable credit limit. Also, make sure that you understand all the fine print before choosing your card and that you can manage any credit card debt.