Once upon a time, the Orchard Bank credit card was our favorite choice for bad credit. With a low APR and very reasonable fee chart, it was, without a doubt, a top secured credit card. Unfortunately, the Orchard card is being discontinued. It’s a sad day at NerdWallet as we bid farewell to one of our oldest, most trustworthy friends. While you can never truly fill the gap left by a close pal, we realize the need to move on and find a new BFF. For folks trying to rebuild bad credit, allow us to introduce the Capital One® Secured MasterCard®. We think you’ll like him.
The Capital One® Secured MasterCard® is an excellent credit building tool. It MIGHT even be a little better than the Orchard Bank card, but don’t tell Orchard we said so. The cost is low and the terms are great. Even with an abysmally low credit score or a recent bankruptcy on your record, you can still qualify. Let’s take a look at the details and see how the Capital One® Secured MasterCard® stacks up against its predecessor.
Why we dig the Capital One® Secured MasterCard®
Let’s start with the most important aspect: cost. This guy is cheap. Seriously. The Orchard Bank card’s annual fee was good at $35, but the Capital One® Secured MasterCard®’s is $0. As far as secured credit cards go, you can’t do better than that.
Secured credit cards require you to put down a security deposit before you can spend. The deposit sets your credit limit and ensures the bank won’t lose money from missed payments. Generally, if you put down $200, you’ll start with a $200 credit limit. If you put down $300, you’ll start with a $300 credit limit (and so on). One of the cool features about the Capital One® Secured MasterCard® is you don’t always have to put down a full deposit. Depending on your credit, they’ll ask you for $49, $99 or $200. Regardless of your minimum, you’ll start with a full $200 limit. If you so choose, you can then deposit more money to increase your limit (up to $3, 000). Eventually, you’ll qualify for a better card and be able to close your account. When you do, all money you’ve deposited will be refunded.
APR is where Orchard clearly had the competition beat. It was only 7.99%, which is sort of unbelievable. The Capital One® Secured MasterCard®’s APR is quite a bit higher: The ongoing APR is 24.99% (Variable).
Don’t like Capital One’s fees? Just wait till you see the other guys
When hunting for a credit card to build or rebuild credit, be smart and guard yourself against predatory offers. People with poor credit are often targets of scams and bogus deals. However, don’t assume you’re without options. Feel free to shop around. Just please be careful. Another great secured card is the Citi Secured MasterCard. Like the Capital One® Secured MasterCard®, the Citi Secured MasterCard’s annual fee is $25.
All in all, they are very similar cards. Even though it has a slightly higher APR, we prefer the Capital One® Secured MasterCard® because of its partial security deposit option. Additionally, if you can’t pay the whole deposit upfront, Capital One allows you to pay in installments with its card. As long as the whole amount is posted within 80 days, you’re set.
Now let’s take a look at some less-than-savory cards. When you’re looking for a credit card straight after bankruptcy or when burdened with a dreadful credit score, you should first learn what is reasonable and what is absurd. You should expect a few small fees and a security deposit around $200-$300. Stay away from offers that sound too good to be true.
To put the Capital One® Secured MasterCard® into perspective, take a gander at the Aventium and Centennial credit cards from First Premier Bank. These abominations offer a $300 line of credit with a $95 security deposit. There’s a $75 first-year annual fee, a $6.50 monthly fee that kicks in your second year, a $45 annual fee on top of the monthly fee and a $3.95 fee to use First Premier’s online services. Want to know the APR? You probably don’t. It stands at a staggering 49.99%.
Then there’s the Platinum Zero from Applied Bank. It has a good pitch going: 0% APR, even if you’re late on a payment; no application fee; and a “choose your own credit limit” feature. Alluring. BUT… fees. More precisely, $119 a year. Interest-free borrowing is certainly enticing, but the cost is untenable.
As you can see, secured cards are the pits. Stick with a name you can trust, build your credit quickly and graduate fast to an unsecured card. The Capital One® Secured MasterCard® is your best bet. There are no gimmicks, no tricks, no buffoonery.
Should you get a secured card?
Folks with less-than-pristine credit histories may not quite qualify for a no-fee or rewards credit card. Secured credit cards are for establishing credit. Eventually, you’ll be able to move on to a regular card with no annual fee (if you choose) and lower interest rates. To this end, the Capital One® Secured MasterCard® is a good, well-rounded option. Yes, paying a security deposit isn’t much fun. But remember, Capital One may let you get away with a lower deposit, and they’ll give you 80 days after approval to come up with the money.
BarNone (1-800-BarNone) is a lead generation company based in Oakland, California. BarNone was founded in 1995 and was later purchased by the First Advantage Corporation in 2005 for their Dealer Services segment. They were later sold to Centrro, Inc. in August 2009.
BarNone connects consumers seeking an auto loan with auto dealerships...