Having poor or no credit can make it difficult to be approved for credit products such as credit cards, loans and mortgages – but it doesn’t have to be the end of the road. The first step you can take towards building your credit is applying for a secured credit card.
To use a secured credit card you’ll need to put down an initial security deposit. Once you use the card and begin making timely payments, your credit score should slowly climb, assuming your card reports to the two major credit bureaus.
Secured credit cards that don’t charge an annual fee
When it comes to no annual fee secured credit cards, you’ve really only got one choice: the Home Trust Secured No Fee Visa. That said, some of the big banks like TD sometimes offer secured credit cards – but they typically don’t advertise them online. You’ll need to visit a branch in person or call to find out if any no annual fee secured cards are available.
1. Home Trust Secured No Fee Visa
Home Trust offers a secured visa card that allows you to choose the best option for your needs: choose a no annual fee card that comes with a purchase rate of 19.99% APR, or choose a lower purchase rate of 14.90% with an annual fee of $59 (or the option to pay $5 per month). By opting for the higher purchase rate, you can avoid paying an annual fee.
No annual fee option. If you choose the no annual fee option, you’ll save $59 annually – but watch out for the higher purchase APR of 19.99%.
Low interest rate option. Should you choose the low rate option, you’ll get a purchase rate of 14.90%. However, you’ll have to pay an annual fee for this option.
Control over your credit limit. The amount of security deposit you offer up will determine your monthly credit limit. Credit limits range from $500 to $10,000.
Credit check. Home Trust will check your credit report for this card, however approval is usually high.
No annual fee option. The no annual fee option comes with a higher purchase rate of 19.99%.
Low interest rate option. The low rate option comes with an annual fee of $59, or a payment of $5 monthly.
How to choose the right no annual fee secured credit card
To choose the best no annual fee secured credit card, ask yourself:
What’s the purchase interest rate?
Although the goal is to pay off your balance in full each month in order to improve your credit score, the purchase interest rate will be important if you think you’ll carry a balance between billing cycles. Some secured cards may offer interest rates as low as 12.99%.
How much credit do you need access to each month?
Your deposit will serve as your credit limit, so if you provide $500 as a deposit, your monthly credit limit will be $500. To increase your credit score, you’ll want to keep your credit utilization ratio below 30%. This means you’ll want to hold a balance of $150 or less a month on your card.
What are the minimum and maximum credit limits set by the provider?
Credit limits for secured cards might be as low as $200 and as high as $10,000. Consider how much credit you’ll need access to each month and plan accordingly when submitting your deposit.
Does the provider report to the credit bureaus?
It’s important to know that the provider will report your payments to the two major credit bureaus (Equifax and TransUnion). If the provider doesn’t report to the bureaus, your credit score won’t change.
If you’re looking to build or rebuild your credit, a secured credit card could be a great solution. While your options are slim, you can find a no annual fee secured credit card to help keep your costs to a minimum.
If you think you could benefit from a secured card that charges a low monthly fee or an annual fee, compare more secured options in the table below.
Yes. To minimize risk, most secured credit card providers charge an annual fee. Many will charge a monthly fee instead of an annual fee.
Your credit utilization ratio is the total amount of credit you are using divided by the total amount of credit you have access to. Providers like to see a credit utilization ratio of 30% or less, and your ratio will affect your credit score.
If you have only one credit card with a credit limit of $1,000 and you carry a balance of $300 on it each month, your credit utilization ratio will be 30%.
Emma Balmforth is a Producer at Finder. She is passionate about cryptocurrency, credit cards and loans, and enjoys helping people understand the often confusing world of finance. Emma has a degree in business and psychology from the University of Waterloo. She wants to help people make financial decisions that will benefit them now and in the future.
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