Everyone with poor credit has been there. You apply for a credit card, only to be informed that your credit score just doesn’t make the cut. Getting the notification you’ve been declined for credit is no fun, but there are alternatives.
For those of you with less than perfect credit, there’s the option of a secured credit card. Capital One Secured Card is one of the most popular of these. Since 1988, Capital One has been offering credit lines to consumers of all credit health. Should you look into a Capital One Secured Card? Let’s take a look.
What’s a Secured Credit Card?
You’re no doubt familiar with credit cards. A lender or financial institution will take a look at your credit history, and based on your score and other factors will determine whether they’re willing to give you that little piece of plastic which affords you some financial flexibility.
Credit cards, when used correctly, are very useful little tools. They’ll allow you to keep a little money aside in case of emergency car repairs, for example. Some have points, which means that with every purchase you’ll earn rewards toward plane tickets or other incentives. Some offer cash back. And, without a credit card you sometimes can’t do things like rent a car or book a hotel room.
However, if you don’t have good credit, you’re unlikely to be approved for a credit card. That’s where secured cards come in.
A secured credit card works just like a regular credit card. However, there’s a difference. When you’re approved for a secured credit card, you’ll be required to send a deposit to the lender. In most cases, this deposit will equal the amount of your credit line. For instance, you’ll send $200 and be granted a $200 credit limit.
Secured credit card issuers do report your payments to the credit bureaus. That means that a secured card, when paid on time, can actually help improve your credit score. So what about the Capital One Secured Card? Why is it so popular? Let’s look at Capital One Secured Card reviews.
Capital One Secured Card: Review
One of the facets of the Capital One card that consumers like best is that the deposit is flexible. Let’s say your credit is just okay. It’s not terrible, but could use a little work. Applying for the Capital One Secured Card is likely to present you with some flexible options.
People with fair credit cards may be given the opportunity to get a $200 line of credit for just a $49 deposit. Capital One Secured Card offers three options, based on creditworthiness. You can pay either $49, $99 or the full $200 to get a $200 credit limit.
When bills are paid on time, your credit limit is increased. You might, for example, see an increase in your credit limit to $300 after 6 on-time payments. This is done with no further deposit required.
Capital One Secured Card reviews also cite the interest rate as a positive. In some cases, your secured card may come with an introductory 0% APR. After that, however, the interest rate will be bumped up significantly. At time of writing, the card carries an APR of 24.99%.
Customers also love that the card requires no annual fee, and that there are no hidden charges. It truly does work just like a regular credit card.
People who have used this card also like the online access. When you register your account online, you’ll have full access to bill payment capabilities, statements, customer service and even in some cases, a credit monitoring tool.
Finally, the card is a MasterCard, so it’s accepted almost everywhere. You can use it at the gas pump or to buy holiday gifts online with no issues.
Capital One Secured Card: The Cons
As with any credit product, there are cons to the Capital One Secured Card. The first of these, as mentioned, is the interest rate. An APR of 24.99% is extremely high, though this isn’t an abnormal rate for people with poor credit.
It should be noted here that on-time payments will drastically reduce the amount of interest you pay. Smart shoppers who are trying to build credit will pay off the balance each month, completely. Some even use the card like a debit card. For instance, they’ll buy groceries with the credit card then immediately go home and transfer money to the secured card.
There are no rewards associated with the Capital One Secured Card. That said, most rewards cards are reserved for consumers with good credit, and you’d be hard pressed to find a secured card that does earn points.
Finally, the deposit amount may be prohibitive to some. If you’re not approved for one of the lower deposit amounts you’ll have to fork over a full $200 – that’s money you may or may not have handy. There’s good news, though. Capital One will work with you upon your approval to pay that initial deposit in installments. Pay within 80 days of approval and you’re good to go.
Should You Apply for a Capital One Secured Card?
Applying for a Capital One Secured Card is quick and very simple. You’ll simply enter your personal information as well as a bit of information about your income and have an approval or denial within a few minutes.
Keep in mind, however, that the credit inquiry to Capital One is a hard inquiry. Inquiries on your credit report can affect your credit and will stay on your report for years in some cases.
If you’ve have a bad relationship with Capital One in the past, you likely won’t be approved. There are other factors which also may affect your approval odds. That said, Capital One Secured Card is relatively easy to obtain for consumers with less than perfect credit and can actually help you improve your credit score.
If you’re looking for an alternative to a traditional credit card, and have a low credit score, the Capital One Secured Card is a good option to look into.
Of course, there are many more (and often better) secured cards out there. There are also many better credit cards out there in general. It all depends on how good (or bad) your credit is and what you're looking for. So, make sure you check with our other guides and do your research before making your mind up.