Building Your Credit? Try a Secured Card!
Whether you are just starting out and you want to establish credit or you are trying to repair your credit, you may want to consider a getting a secured credit card.
A secured card is different from a normal credit card because you make a deposit into your savings account, which is held as collateral against your secured card. Your deposit will continue to earn dividends while it is held as collateral. This cash deposit/security is used to protect the financial institution in the event you are unable to make payments. If you default on your secured card, your savings will be used to pay off the loan. Also, if you are trying to build your credit and want to establish your independence (and don’t want your parents to co-sign for a credit card), a secured card is a good option. And, unlike prepaid debit cards, secured cards help you build your credit without the fees.
Although it is typically easier to obtain a secured credit card than a normal credit card, there are still some qualifications that you may need to meet. For example, at Westerra you need to be at least 18 to apply on your own and if you’re not 21, you will need to show proof of income. Your credit limit will be as low as $500 and as much as $2,500.
It’s also important to do your research on secured credit cards. You’ll want to be sure to look for a card with no fees and stick with well-known financial brands.
Once you have your secured card, be sure to use it wisely since the issuing financial institution reports your account activity to the credit bureau. To prove you are financially responsible, you’ll want to be sure you make your payments on time (very important!) and not always be at your credit limit as it will have a negative impact on your credit score.
Typically it takes 6 to 12 months of responsible payment history to establish or rebuild credit. Then, you will be able to apply for an unsecured credit card – without pledging your savings as collateral.
Westerra Credit Union offers secured credit cards with no fees for members wanting to rebuild or establish their credit. Simply stop by any Westerra branch or call 303-321-4209 and we’ll be happy to answer any questions you may have.
You may also be interested in:
- How to manage your credit score – and save money!
- Using and Managing your checking account wisely
Federally insured by NCUA. Equal opportunity lender.