There are 2 basic options for ‘no credit’ cards. Prepaid cards may allow those unable to get credit cards to purchases online, and to teach your kids how to use and repay regular credit cards with accruing debt, but they don’t help your credit any.
OTOH, secured cards appear to help credit but require a deposit to compensate the risk of your credit line.
Hey SVB,
Actually, I was considering signing up for a credit card – after not having had one in years – just to improve my credit. Any ideas which one might the best? I’m not planning on using it, but just want to have it open.
@James,
With good credit, you can apply for any type of card. I would go for a rewards card in your case since — just in case you decide to use it — you can get rewards (cash back or redeemable points). I actually prefer cash back rewards cards! I personally like Chase (particularly the Freedom card or Sapphire), Citi cards or Amex Blue.
If I were looking at prepaid cards verses secured credit cards I would ask what I hope to accomplish.
If the goal was to help build my credit score back, then a secured card is the way to go.
If the goal is simply to satisfy my need to have a card to make card purchases (online or other) or to teach myself about the concept of card use, a prepaid card is the way to go.
You do have to watch fees with prepaid cards, but that is going to change soon as regulation comes into the industry. However, if you buy from a reputable source, usually the only fee is the initial load fee of a few dollars – mainly covering the cost of the plastic. There may be an inactivity fee after a year but most people should use the cards by then.
DennisJanuary 4, 2012 at 1:38 pm
We easily take for granted the cards we use online, for monthly expenses or regular shopping. I knew of someone who couldn’t make online purchases because she didn’t have a traditional credit card or bank account. I can also imagine just how much of a pain it would be if you’re a student who couldn’t pay for books or necessities while at Uni. I’d start out with a secured card which can be used in place of a regular credit card.
bryantJanuary 5, 2012 at 1:22 am
For people in certain situations with no credit (or still working to build their credit history), certain types of credit cards may help. They’re like credit card training wheels.
Go SecuredJanuary 5, 2012 at 6:54 am
When you need to rebuild a good credit history, you’ll need a secured credit card that’s reported to the credit bureaus. Check with the creditor, because not all (most?) companies report their accounts to the credit agencies. If your credit standing is good, some banks might be willing to convert a secured credit card into an unsecured account. Ask your creditor if that’s an option for your secured card.
Thanks for the comments… I’d also add — I carefully read the terms and conditions for any card I’m interested in, prior to any application. Because these cards are usually intended for those with less experience with credit, new customers should make sure that they can handle any card charges, even if it’s just for a secured card. Note that APRs can change for a variety of conditions, such as a late payment or failure to pay.
KarenFebruary 4, 2012 at 2:14 pm
Not sure about this advice because many of these cards have crazy fees. It might be worth the time to investigate alternatives like a debit card that’s linked to a good checking or savings account, preferably with a credit union.
{ 10 comments… read them below or add one }
There are 2 basic options for ‘no credit’ cards. Prepaid cards may allow those unable to get credit cards to purchases online, and to teach your kids how to use and repay regular credit cards with accruing debt, but they don’t help your credit any.
OTOH, secured cards appear to help credit but require a deposit to compensate the risk of your credit line.
-Dan Malone-
I agree that these are a good option for someone just starting to build a credit record. I didn’t know there were so many. Good stuff.
Hey SVB,
Actually, I was considering signing up for a credit card – after not having had one in years – just to improve my credit. Any ideas which one might the best? I’m not planning on using it, but just want to have it open.
@James,
With good credit, you can apply for any type of card. I would go for a rewards card in your case since — just in case you decide to use it — you can get rewards (cash back or redeemable points). I actually prefer cash back rewards cards! I personally like Chase (particularly the Freedom card or Sapphire), Citi cards or Amex Blue.
If I were looking at prepaid cards verses secured credit cards I would ask what I hope to accomplish.
If the goal was to help build my credit score back, then a secured card is the way to go.
If the goal is simply to satisfy my need to have a card to make card purchases (online or other) or to teach myself about the concept of card use, a prepaid card is the way to go.
You do have to watch fees with prepaid cards, but that is going to change soon as regulation comes into the industry. However, if you buy from a reputable source, usually the only fee is the initial load fee of a few dollars – mainly covering the cost of the plastic. There may be an inactivity fee after a year but most people should use the cards by then.
We easily take for granted the cards we use online, for monthly expenses or regular shopping. I knew of someone who couldn’t make online purchases because she didn’t have a traditional credit card or bank account. I can also imagine just how much of a pain it would be if you’re a student who couldn’t pay for books or necessities while at Uni. I’d start out with a secured card which can be used in place of a regular credit card.
For people in certain situations with no credit (or still working to build their credit history), certain types of credit cards may help. They’re like credit card training wheels.
When you need to rebuild a good credit history, you’ll need a secured credit card that’s reported to the credit bureaus. Check with the creditor, because not all (most?) companies report their accounts to the credit agencies. If your credit standing is good, some banks might be willing to convert a secured credit card into an unsecured account. Ask your creditor if that’s an option for your secured card.
Thanks for the comments… I’d also add — I carefully read the terms and conditions for any card I’m interested in, prior to any application. Because these cards are usually intended for those with less experience with credit, new customers should make sure that they can handle any card charges, even if it’s just for a secured card. Note that APRs can change for a variety of conditions, such as a late payment or failure to pay.
Not sure about this advice because many of these cards have crazy fees. It might be worth the time to investigate alternatives like a debit card that’s linked to a good checking or savings account, preferably with a credit union.