Transcription
Getting a secure credit card is one of the best and most famous ways to start building your guys' credit up. So, if you guys are trying to go this route, there's plenty of credit card issuers that offer secure credit cards. But just make sure you guys choose the right one because, believe it or not, there are some pretty bogus credit cards out there that I would not recommend getting and that you should just totally stay away from.
So, in this video, I'm going to be going over five things you should be avoiding when it comes to getting a secure credit card. And then I'll also give you guys a few tips on what else you can do to bring your credit score up. And then I'll talk about some secure credit cards that are worth looking into.
If you're already subscribed, then welcome back. But if you guys are new to my channel, my name is Sford and you are now watching Just Money, where we talk about financial related topics such as personal and business credit, real estate, and other financially related topics. So, if that's something you're into, then you're probably going to want to consider subscribing. But without further ado, let's get into today's video.
Okay, so secured credit cards are designed to help you start building or rebuilding your credit if you currently have a low credit score. Secured credit cards are not like unsecured credit cards, AKA, quote unquote, regular credit cards, because you have to put an initial security deposit down for that secure credit card. Unsecured credit cards, on the other hand, you do not have to put an initial security deposit because you already have good credit, so they trust you. So, if you don't have good credit, they will not trust you for a regular credit card. You're going to have to put an initial security deposit to obtain that secure credit card.
But after you put an initial security deposit down, that same security deposit will then become your credit limit amount. For example, if you put $200 down as a security deposit, then that same $200 will then become your credit limit amount. Then you just use the secure credit card like a regular credit card and just make on-time payments on it every month. Month, you would then make on-time payments for about six to seven months because the credit bureaus need to see that you have a good payment history established because each month that you're making those on-time payments, those on-time payments are going to get reported to the three major credit bureaus, which are Experian, Equifax, and TransUnion. If those three credit bureaus see that you're making on-time payments every month, then they will definitely boost your credit score. And before you know it, your credit score is going to go up.
And most likely, you're going to be eligible to graduate to the unsecured version of whatever secure credit card you have in most case scenarios. And I say in most case scenarios because some secure credit cards out there will not let you graduate. But we'll talk more about that in just a bit.
But the type of people who get secure credit cards, though, are mostly these three types of people from what I've noticed. One, you're either new to credit because you're a young adult. Two, you went through some kind of financial burden in your life and now you're trying to get back on track. Or three, you never really looked into credit. So, if you fall into any of these categories, you're definitely not the first person that's been here before, and you will definitely not be the last. But the good thing is, though, I've seen plenty of people bounce back from this situation and now they're just killing it. So, no need to worry because as long as you put in the work, then your credit score is always going to improve.
But I do want to make sure that you guys are on the right track. So, now I'm going to show you guys five things to avoid when looking for a secure credit card.
So, one of the first things you want to avoid when looking into getting a secure credit card is check if there will be any annual fees. If the secure credit card that you're looking at has any annual fees, then I would run the other way as fast as possible. I just feel like a person should not be charging an annual fee on a security credit card, especially since they're putting the social security deposit down. So, I don't really believe in annual fees when it comes to getting a security credit card. But another reason why I say this too, though, is because there are plenty of other secure credit cards that you can get out there that won't charge you an annual fee. So, if you literally have an option to get a secure credit card with an annual fee or without an annual fee, why in the world would you get a secure credit card that has an annual fee on it? That just makes no sense to me. I've seen security credit cards out there that charge $25 or even $35 for an annual fee, and guys, let me tell you, this is not it. So, if the secure credit card that you're looking at has an annual fee on it, I would run the other way as fast as possible.
And by the way, guys, towards the end of this video, I'm going to be mentioning some secure credit cards that are perfect for you if you're looking to get one soon. But now, let's talk about the second thing you should be avoiding when it comes to getting a secured credit card.
The second thing you should be avoiding when it comes to getting a secured credit card is check if there are any hidden or outlandish fees. Some secure credit cards out there will charge something called a program fee, which is actually really crazy to me. And this program fee will typically be $20, depending on what credit card issuer is issuing the card. And this fee is required just to open the account. So, in all honesty, this is just a really pointless expense to me, which never makes sense doing, especially when there's plenty of other different options out there. Why would you settle with a card that charges something called a program fee? So, just avoid these ridiculous fees, guys.
But moving on to number three of things you should be avoiding when getting a secure credit card. The third thing you need to be avoiding when getting a secure credit card is check if this card will graduate you to unsecured status. Some secure credit cards out there will not allow you to graduate, and this can actually hurt you in two different ways. One, if you apply for a new unsecured credit card, it's going to be a hard pull on your credit, which can momentarily drop your credit score. And two, once you close the secure credit card, your credit score is going to drop a bit. And the reason for this being is because you're bringing down the average age of your accounts and also lowering your overall credit limit. So, I would recommend to look for a secure credit card that will let you graduate to unsecured status once it's time.
But moving on to reason number four now of things you should be avoiding when getting a secure credit card. The fourth thing you need to avoid when getting a secure credit card is check if they will let you increase your credit limit down the road. Usually, whenever you get a security credit card, if you want to add a bigger deposit later on down the road for a higher limit, then you can. But some other security credit cards out there will not allow you to do this. Or if they do end up letting you do this, then you're going to have to wait a few months of making consistent on-time payments if you want to add a bigger deposit down the road. This to me is insane, and I personally don't even know why somebody would even want to put up with something like this because, again, there are other better secure credit cards out there. You don't have to settle for less.
So, if you guys ever have to search for a secure credit card, go with a credit issuer that will let you deposit more money down the road on your secure credit card so that way you can have a higher limit. Because if you have a higher limit on a secure credit card, then your secure credit card is going to be easier to manage, and you wouldn't have to micromanage every purchase that you make if you were to only have a $300 credit limit. So, when searching for a secure credit card, make sure that you can always add deposits later on down the road.
But the last thing you should be avoiding when it comes to getting a secure credit card is number five. Avoid getting a secure credit card that has a low max deposit. Some secured credit cards out there have a max deposit of only $2,000, while others security credit cards on the other hand will have a maximum deposit of $5,000. One thing I noticed about a lot of clients that I work with is they all make pretty good money, but they don't have credit because they never wanted to have credit. So, to someone who makes more money, they might want to put a higher initial security deposit down versus putting a low deposit down because if you think about it, not everybody out there wants to manage $300 on a card. Because if you have a $300 credit limit, then 30% of that is going to be $90. And what person out there only needs to use $90 on a card?
And by the way, the reason why I say $90 is because you never want to go past 30% of your credit utilization ratio because it just looks bad to other lenders out there whenever you try to apply for something. And not only that, but your credit will actually start to go down because 30% of your credit score is going to come from amount owed, AKA your credit utilization ratio. So, all I'm saying is, if you want to use more out of your secured credit card, then look for a secured credit card where they have a maximum deposit of $5,000 versus only $2,000.
But those are pretty much the five red flags to avoid when looking for a secure credit card to boost your credit score.
And ladies and gentlemen, another thing you can actually do to boost your credit score really quick is to get added as an authorized user. By getting added as an authorized user with somebody who has good credit, their credit history then becomes your credit history, and that right there is going to boost your credit score. Just make sure that they have good credit and a high limit on that credit card for maximum benefits. And also, check with the credit issuer if it reports to the credit bureaus because if it doesn't, this is going to be a waste to do, and I wouldn't recommend doing it.
Another thing I recommend doing to boost your credit score, though, is getting an installment loan of some sort. Usually, credit unions will allow you to have something called a secured savings loan, which is backed by your money. So, you're pretty much taking your own money and converting that into an installment loan. This helps you build credit because this is going to help with your payment history, which accounts for about 35% of your overall credit score. And this is also going to help with your credit mix, which accounts for about 10% of your overall credit score, because you need both installment credit and revolving credit if you guys want a higher credit score. So, these are a few things you guys can do if you guys are looking to boost your credit score.
But before I end this video, let me name drop a few secure credit cards that I would definitely recommend that you guys look into. The first credit card that I always recommend to people is going to be the Discover it secured credit card. That credit card is an amazing secured credit card. So, if you're looking to get a secure credit card, I would start looking in that direction first. This secure credit card comes with no annual fees, and there are no hidden fees on this card as well. And this Discover secured credit card will actually allow you to graduate to unsecured status once it's time. But if that already wasn't good enough, you can actually earn a pretty decent amount of cash back on this secure credit card. So, you will legit get money back just for making regular purchases. So, I will always recommend the Discover secured credit card.
But another secure credit card that you might want to look into is the Bank of America Customized Cash Rewards Secured credit card because that card gives you a lot of reward points. And another secure credit card you want to look at is the Capital One, any of the Capital One secure credit cards, because both of those are great. I made a video not too long ago on the best five secure credit cards to apply for, and I even reviewed them. So, if you want to check that video out, then feel free to browse my YouTube channel, Just Money, or hit the link in the description below. Or you guys can just wait till this video is over, and then I'll go ahead and link it for you guys right there. So, just wait till the video is done if you guys want to watch that video.
But that's pretty much it for today's video, guys. I hope you guys found value in any of this information. Let me know in the comments if you're currently trying to get a secure credit card right now or if you actually had one in the past before. I would like to know.
And really quick, everybody, I do offer one-on-one consultations. The link will always be in the description below. But if you guys made it to the end of the video, we are at 32,236 subscribers at the time of this recording. So, I do appreciate all who watch. I do post weekly videos for those that don't know. And if you guys haven't yet already, don't forget to hit the like button, subscribe to the channel if you guys haven't yet already, and don't forget to hit the notification bell so that way you guys get notified every time I post a new video.
And again, we talk about personal and business credit, real estate, and other financial related topics. So, if that's something you're into, then you're probably going to want to consider subscribing. We talk about how to get high limits on your guys' credit cards, talk about how to boost your personal credit, how to obtain business credit, we talk about real estate, we talk about mortgage loan programs, we talk about all that. So, this is your one-stop shop. And for those that don't know, I'm a licensed real estate agent, a realtor, and I'm also a licensed mortgage loan originator as well. So, if you guys have any questions or concerns in regards to real estate, all my information will always be in the description below.
But thank you guys so much for watching, and I will see you in the next video. Thanks for watching.