You’ve chosen to go with a secured credit card, great! You’ll be able to slowly build your credit and create a perfect budget that works for you. However, there are other additional benefits to being a credit card holder. Namely, most credit cards come with rewards of some kind. Some may offer you cash back on certain purchases, others might have travel rewards. Regardless, if you can find a good card with some attractive rewards, you’ll be in a pretty nice spot. Let’s talk about rewards that are worth it and some others that might distract from what’s really important to look for in a credit card. In the end, we hope to help you settle on the absolute best credit card to suit your needs.
Why Are Rewards Important?
Why Do Credit Card Companies Offer Rewards?
If you’re in the market for a secured credit card (or any credit card for that matter), you’ll want to do some research. Many companies do not offer rewards for secured credit cards, but a handful of companies will. It’s worth it to flip through all the possible secured credit card choices in order to find one that does offer a little something extra.
These days, it’s rare that a card company or bank wouldn’t want to reward their customers for good spending habits, and while it is somewhat less typical for secured credit cards, even these can sometimes offer some nice perks. After all, the banks and card companies are making a killing off of interest rates and fees alone, so why not toss in some rewards to sweeten the deal? Just because you’re going with a secured credit card doesn’t mean you should assume that rewards are out of the question. Whether they require an upfront deposit or not, credit cards all essentially work the same. You’re still subject to interest and fees with a secured card just like anyone else. You deserve some reward for your hard work paying all of that off.
With that being said, common secured credit card rewards that are worth it include: cash back rewards, travel mile rewards, significantly lower interest rates and fees, and especially lower than usual minimum security deposits. Now, let’s go through a couple of these and explain why you might want them.
What Type Of Rewards Can I Expect?
First, cash back rewards are awesome, especially for a secured credit card. Most folks who sign up for a secured card are planning on using it fairly often to bring up their credit score or keep their budget in check. Cash back rewards will often provide you with a one or two percent reward on most purchases. Usually there are restrictions on what type of purchases can earn you rewards. For example, groceries and gas are common things to get rewards for. You can then redeem the rewards after you meet a certain limit. Some banks will deposit the amount into your account, others will send you a check, some might load a prepaid card. you’ll want to read that fine print before signing up just to make sure that it works for you.
Another great reward is travel miles. If you’re a person who travels frequently for work, family, or you just want to see the world–this is for you. Most card companies that offer travel rewards will give you a certain number of miles based on money spent. For example, you may earn one or two miles per dollar spent, depending on what the product is that you’re buying. Check with the company to see if there is a limit on how many miles you can earn per year. The miles may expire and may need to be redeemed by a certain date, so you’ll need to be cognizant of that as well. Lastly, some cards might even offer a companion voucher, extra travel insurance, and a bonus lump sum amount of miles when you open the account and at the beginning of each year. Make sure you’re clear on exactly what airlines you can use and what restrictions apply.
How Do I Know If It’s A Scam?
Genuine credit card companies are required by law to give you all of the information associated with signing up for a new secured credit card. They must tell you the interest rate, fees associated with the card, whether a credit check is required, and much more. You may have gotten those “no credit check required!” or “no interest for the first year!” credit card offers in the mail. While some of them are legitimate, offers that skip the credit inquiry are not. No reputable lending or credit company will offer anything without a credit check, it’s just not possible. If something is going to depend on your ability to repay someone, like a credit card does, your credit must be checked in order to qualify, and calculate the risk to the lender/creditor. No legitimate company will open up a line of credit without interest fees either. We wish it were true, but it’s just not.
The other thing to watch out for are “easy to sign up” cards. You may have seen ads in the mail that ask you to call a “toll free” line or come across online ads that say “sign up within minutes”. These scams are trying to steal your money or information. “Toll free” lines might actually charge a bundle by the minute, so beware. You might end up with a nasty bill in the mail or many charges that you didn’t expect. Ads that offer quick sign up might just be looking for you to enter your information. Never enter your personal information into an unsecure website or over the phone unless speaking with your bank or card company directly.
Once scammers get your card information, social security number, name, date of birth, and more they will run with it and may try to steal your identity. This means, someone may try to steal money directly from your accounts or they may open up new accounts and new lines of credit in your name. Before long the lines of credit could be sent to collections, which can severely affect your credit.
The bottom line is, if you’re unsure about any website or mail offer, don’t go through with it. Do more research to find out if it is legitimate. Credit card offers should be sent directly from the company offering it. If you’re taken to an unfamiliar third party website, it’s probably a scam. You shouldn’t be surprised or confused by anything being offered to you.
How Do I Know Which Card Is The Right One?
Here is where you’ll know which cards will make the cut and which ones won’t. Earlier we mentioned lower interest rates and deposit minimums. Now, we’re going to want to get down to the nitty gritty. Some cards may be offering rewards in order to cover up the fact that their card is going to cost you an arm and a leg in fees and interest. Sure, for secured credit cards you’ll most likely end up spending more than usual on interest rates, but they shouldn’t be through the roof. There are plenty of cards out there that waive annual fees, keep their interest rates low, and allow a small minimum payment. These should be the absolute most important things to check off of your list before you even look at rewards.
And remember, you only pay interest on outstanding debts on your credit account. If you pay your credit card off in full every month — which you should definitely be doing if your goal is to use your card to build up or repair your credit — you shouldn’t have to worry about interest, and can enjoy the rewards. If you aren’t totally confident in your ability to do this, then you’ll definitely want to prioritize lower interest cards.
What Interest Rate Should I Expect?
Interest and fees are inevitable; everyone with a credit card has to deal with them, but the difference between fifteen and thirty percent interest is a huge leap. For a secured credit card, anything under twenty percent is pretty good. If you can get something lower than fifteen percent, that’s great. Anything higher than twenty percent should cause you to take a second look. You’ll see many cards offering twenty to twenty-five percent interest just because they can. They know that many people applying for these cards could be in a somewhat desperate situation and may overlook the interest rate, but don’t be fooled. There are many options available with a reasonable rate at twenty percent or below.
What Kind Of Fees Will I See On My Bill?
As far as fees go, you’ll be looking at anywhere between zero and fifty dollars annually. Most cards live somewhere in between those two numbers, but you can definitely find a secured card that waives the fee entirely. For cards that don’t have a fee, refer back to their interest rate. As with offering rewards, they might be axing the fee just so they can get away with charging you more in interest. In the end, interest is going to hurt you much more than an annual fee ever would. For example, if you spent $250 on your credit card and your interest rate is twenty percent, you’re looking at paying fifty dollars just in interest. So, you’ve got to be willing to find a good balance between interest rates and fees that works for you.
Finding the perfect credit card can take some time. I know that reading through all of that fine print can be tedious, but checking out all of the details now can save you from a serious headache later when you find unexpected charges on your bill or restrictions that you never even thought of. Once you’ve found a secured credit card that offers a fair interest rate, low annual fee, and a nice rewards bonus you’ll know that it’s the right one.
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