Secured card vs. Unsecured card

Hello,

I just received my SSN a month back and am in process of starting to build my credit history.
I applied for a bank's unsecured credit card but got rejection saying I have no credit history.

Now, I was thinking to go either for a secured card or for an unsecured card from First Premier which has got high fees associated with it.

I would like to ask which one is preferable in long run to develop good credit history.

Thanks.

Hi Benedict - between the two cards that you're referring to, if you don't have a credit history at all, then the secured card is probably the only one you'll qualify for right now.

In many cases for those just starting out, a secured credit card is the best way to help establish a credit file and credit history. When you're choosing a card, be sure that you check with the issuer to make sure they report to the credit bureaus. Some will report to one or two bureaus and others will report to all three. And some won't report at all. If the account isn't reported to the credit bureaus, it won't help you build your credit file.

As far as which card is the best card for you, it's going to depend on what you're looking for and the fees you're willing to pay. Some cards charge an annual fee and/or an additional sign up fee, some don't. Before choosing a card, it's important for you to read the fine print and review all of the terms (especially interest rates and fees) before you decide which option works best for you. Credit.com offers a convenient "rate & details" option on all of the credit card offers. You'll find the secured card offers here: Secured Cards

After you've had time to build and establish your credit history, you'll be able to move out of the higher interest rate secured cards and into a traditional, lower rate credit card. After a year or so, you may even be able to get the secured credit card issuer to convert the account to a traditional credit card based on your account history with them.

Credit.com offers some great resources for those just starting out and are looking to establish credit for the first time. Here a couple of articles that should be helpful:
How to Get Credit if You're 20-Something
Starting From Scratch

Thank you ... i appreciate your help.

dtempleton wrote:Hi Benedict - between the two cards that you're referring to, if you don't have a credit history at all, then the secured card is probably the only one you'll qualify for right now.

In many cases for those just starting out, a secured credit card is the best way to help establish a credit file and credit history. When you're choosing a card, be sure that you check with the issuer to make sure they report to the credit bureaus. Some will report to one or two bureaus and others will report to all three. And some won't report at all. If the account isn't reported to the credit bureaus, it won't help you build your credit file.

As far as which card is the best card for you, it's going to depend on what you're looking for and the fees you're willing to pay. Some cards charge an annual fee and/or an additional sign up fee, some don't. Before choosing a card, it's important for you to read the fine print and review all of the terms (especially interest rates and fees) before you decide which option works best for you. Credit.com offers a convenient "rate & details" option on all of the credit card offers. You'll find the secured card offers here: Secured Cards

After you've had time to build and establish your credit history, you'll be able to move out of the higher interest rate secured cards and into a traditional, lower rate credit card. After a year or so, you may even be able to get the secured credit card issuer to convert the account to a traditional credit card based on your account history with them.

Credit.com offers some great resources for those just starting out and are looking to establish credit for the first time. Here a couple of articles that should be helpful:
How to Get Credit if You're 20-Something
Starting From Scratch

Secured and unsecured cards can be used to pay for goods and services. However, a secured card requires you to open and maintain a savings account as security for your line of credit; an unsecured card does not.

The required savings deposit for a secured card may range from a few hundred to several thousand dollars. Your credit line is a percentage of your deposit, typically 50 to 100 percent. Usually, a bank will pay interest on your deposit.

In addition, you also may have to pay application and processing fees, sometimes totaling hundreds of dollars. Before you apply, be sure to ask what the total fees are and whether they will be refunded if you're denied a card. Typically, a secured card requires an annual fee and has a higher interest rate than an unsecured card.

Another thing to look for in a secured card is to make sure you have a grace period on purchases. Having a grace period can save you hundreds of dollaa a year in finance charges.

This message was edited 1 time. Last update was at 10/29/2009

A quick question on your quote:

In many cases for those just starting out, a secured credit card is the best way to help establish a credit file and credit history. When you're choosing a card, be sure that you check with the issuer to make sure they report to the credit bureaus. Some will report to one or two bureaus and others will report to all three. And some won't report at all. If the account isn't reported to the credit bureaus, it won't help you build your credit file.

I was considering the Bank of America Secured credit card.. would anyone know if they report to all three credit bureaus? I asked the bank rep and they did not know this? They just said it is reported to Credit agencies, but did not know whether it was all 3 or just 1 or 2?

Also can any one help demystify the term "Grace period" for me please and how does it impact you.
I plan on spending on my secured credit card and pay the bills in full before the due date, would that attract any kind of Finanace fee, charges or interest.

Thank again! This is the best site that I have come across for information on building credit! Highly recommended!

Look forward to your expert advise.

KRS

Thanks for the compliment! We appreciate it.

I would be shocked in Bank of America's secured card did not report to all three agencies. They are a major issuer and all their other cards report, so I am pretty confident that one will as well. (You are talking about a secured card, and not a prepaid card which is more like a debit card, right?)

In terms of a grace period, if the card offers one you can pay your balance in full and incur no interest charges. However, when choosing a debit card, you should look for other fees such as monthly "maintenance" fees, annual fees, a fee for live customer support etc.

I hope this helps get your credit back on track. Let me know how it works for you!

Gerri, thank you again! Yes, I was talking about the Bank of A Secured credit card!