If your FICO score is on the low side, secured credit cards are one of the best ways to rebuild your credit. These cards require you to put down a security deposit as collateral. But you may be able to get standout features, such as a higher-than-average credit line with the Wells Fargo Secured Visa Card or even cash-back rewards with the Discover it® Secured Credit Card – No Annual Fee.
Let’s take a look at why these are two of the Nerds’ favorite secured cards.
If rewards are important to you
When the Discover it® Secured Credit Card – No Annual Fee was announced in January 2016, the Nerds were instantly smitten with it. Usually, if a secured card has low fees and reports cardholders’ activity to the credit bureaus, we’re happy. But the Discover it® Secured Credit Card – No Annual Fee also offers cash-back rewards, which is extremely rare for a secured credit card.
Cardholders earn 2% cash back on up to $1,000 in combined gas and restaurant spending per quarter, plus 1% back on all other purchases. The card has an annual fee of $0, and after 12 months Discover will automatically begin to evaluate your account monthly to see whether you’re ready to move to a regular, unsecured Discover card.
One drawback: the highest available credit limit for this card is a middle-of-the-road $2,500. Even if you don’t plan to spend more than that on your credit card in a given month, it can still make your spending feel constrained. That’s because using a smaller percentage of your available credit is a key factor in building your credit. If your limit is only $2,500, spending more than, say, $750 in a given month can cause a little hiccup in your score. That’s true even if you pay it off in full before the bill is due.
If you want a higher credit limit
The Wells Fargo Secured Visa Card offers something unusual in the secured cards space: a five-figure credit limit. Your credit limit will be equal to your security deposit, so if you’re able to put down the maximum — $10,000 — your credit limit will also be $10,000.
If you’re trying to rebuild your credit but you have substantial assets, the Wells Fargo Secured Visa Card is a great choice. With a higher credit limit, you will be able to keep your credit utilization ratio — the amount you owe compared with your total available credit — as low as possible. That will help you boost your score.
The Wells Fargo Secured Visa Card’s annual fee is $25. There are no rewards, and there’s no automatic process for transitioning to an unsecured card like there is with the Discover it® Secured Credit Card – No Annual Fee.
But if a higher credit limit is your top priority even as you’re building your credit, the Wells Fargo Secured Visa Card is a great choice.
Want more options? Check out NerdWallet’s best secured credit cards. Chances are you’ll find one with the features you value the most.
More from NerdWallet
How do secured credit cards work?
What to do if you’re denied a secured credit card
How to get an unsecured personal loan
Virginia C. McGuire is a staff writer at NerdWallet, a personal finance website. Email: virginia@nerdwallet.com. Twitter: @vcmcguire.
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