Top secured credit cards for new parents

By Zina Kumok, personal finance writer

When you have a child, life starts feeling a little more serious. Your career isn’t just a job anymore, it’s your child’s college fund. Your health isn’t just an answer on a doctor’s form, it’s your ability to play and keep up with your child. Your credit isn’t just a score, it’s everything holding you back from giving your child a better life.

Thankfully for new or soon-to-be parents, secured credit cards offer a way to get your credit back on track, while providing a few bonuses along the way. These cards use money deposited from the cardholder as collateral, so issuers can safely give people with low credit an opportunity to get back on their feet.

However, not every secured card is created equal. Here are the best options for new parents looking to improve their finances.

Discover it Secured Card

This secured card is one of the few to offer cash-back rewards. Users can earn 2% at gas stations and restaurants and 1% on all other purchases. There’s a $1,000 limit on all cash-back rewards per quarter, but this probably won’t be a factor for new parents buying diapers and baby formula every month.

There’s also no annual fee, and Discover matches all cash-back earned in one year for first-time cardholders. Consumers can even check their FICO credit score for free. That means parents have a way to track their credit progress and see when they’re ready to graduate to a regular card.

Consumers must deposit the amount they want as their credit limit. Each month, Discover will review the account to see if the credit score has increased enough to make the account holder eligible for a regular card.

This card currently has a 23.24% variable APR and a minimum $200 deposit.

Secured Mastercard from Capital One

Capital One provides one of the only secured cards that doesn’t require a deposit equal to the credit limit. Users who qualify can deposit as little as $49 or $99 to receive a $200 limit.

This is great news for parents on the cusp of qualifying for a normal credit card who just need to do a little credit rebuilding. Those who don’t qualify for a smaller amount need to put down at least $200.

Like Discover, Capital One offers users access to the Credit Wise program, where they can monitor their credit report for free. After five months of on-time payments, Capital One reevaluates the account to determine if you qualify for a bigger credit limit with no extra deposit.

The Secured Mastercard has a 24.99% APR and no annual fee. Cardholders can qualify for a maximum $3,000 credit limit.

Bank Americard Secured Card

The Bank Americard Secured Card has a $300 minimum deposit with a $4,900 maximum. This card comes with a $39 annual fee and an APR of 20.49%.

Bank of America automatically reviews your account after one year to determine if you qualify for a normal credit card. If you do, your deposit will be refunded and you can continue to use the card. This only applies to customers whose credit score qualifies.

The automatic evaluation is ideal for parents too busy juggling a career and new baby to apply for a new credit card. Bank of America provides secured card users many of the same benefits that it does to normal credit card holders, including fraud protection and mobile bill pay.

USAA Secured Credit Card

USAA provides the best interest rates on its secured cards, ranging from 10.15-20.15% depending on the individual’s credit score. Unfortunately, only those with military ties are eligible for the card. More information on eligibility is available here.

USAA has two secured cards, the USAA Secured Card from American Express and the USAA Secured Card Visa Platinum. Both have the same variable interest rate, a $35 annual fee, no foreign transaction fees and no penalty APR. This card is great for parents who want to travel abroad with their kids without paying hefty fees.

USAA also provides extended warranty coverage for purchases made with the card, collision damage coverage on rental cars and assistance if your identity is stolen.

Visa cards are more commonly accepted than American Express - one of the only significant differences between these two cards.

US Bank Secured Credit Card

This card requires a $300 minimum deposit, and users can deposit as much as $5,000. That slightly than higher minimum deposit comes with one key advantage. US Bank stores the deposit in a savings account where it earns interest while you use the card.

US Bank reviews each account after its anniversary to gauge eligibility for a regular credit card. The also has one of the lowest interest rates at 19.24%. If you’re a new parent who might not be able to pay the total balance each month, this is a great lower-interest option.

One of the best benefits for consumers is a longer than average grace period, helpful for new parents who might forget the due date in between sleepless nights and foggy days. US Bank also allows customers to choose their own due date and method, which decreases the likelihood of missing a payment and damaging an already-fragile credit score.

How to choose the best secured card

There’s no universal best card for new parents - it all depends on your individual needs. Couples strapped for cash might benefit from a card with no annual fee, while those actively tracking their credit should choose a card that provides free and simple access to their credit score.

The minimum deposit is another factor new parents should take into consideration. Can you afford to hand over $300 that you won’t have access to for several months? If not, choose a card with a smaller deposit from an issuer that will reevaluate your credit score after a few months.

Most important of all, don’t think of a secured card as a solution to your credit problems. Think of it as a stepping stone to a more responsible financial outlook. After all, healing your credit won’t mean much if you go right back to the habits that put you in this position. Let this be the first of many smart decisions you make for your child’s future.

Looking for a way to build your credit but don't want the hassle of yet another credit card? Check out our credit builder account to see if it might be the best option for you. 

Written on December 7, 2016

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