Do secured cards make sense when building bad credit

Credit scores range from 300 to 850, with scores above 720 considered excellent. Most rewards cards require at least a 670 score. If your score is below this threshold, you may struggle to open an unsecured card and may only qualify for beginner options.

Credit cards help build credit as issuers report balances to major agencies—Equifax, Experian, and TransUnion. Timely payments can lead to improved scores over time. Unsecured cards generally guarantee reporting to these bureaus; however, not all secured cards do so.

Secured cards require deposits that act as the credit limit. This reassures issuers they'll recover money spent by the cardholder if they default on payments. Deposits often start at several hundred dollars but come with restrictions on maximum amounts allowed.

Secured cards also tend to have higher APRs than unsecured ones due to perceived risk by issuers. While some secured cards carry annual fees under $50, many unsecured options do not have these fees and still offer attractive rewards even for those with less-than-perfect credit.

Credit limits on secured cards are tied directly to deposit amounts; thus, they are often lower than those offered by unsecured cards. Responsible use over time could lead lenders to increase limits.

In summary, while secured cards cater specifically to individuals with lower credit scores, there are valuable no-annual-fee unsecured options that can also aid in improving one's financial standing after demonstrating responsible management practices.