Secured credit cards: Get beyond these Top 5 myths

Often derided as tools for consumers with horrible credit, secured credit cards can be a great credit-building tool. Here are five myths debunked to help you understand how to use secured credit cards to maximum advantage. 

2. Myth: Secured cards have high interest rates

Paul Sakuma/AP/File
Steve Wheelock holds up his Discover Card along with his American Express, Bank of America, and Capital One Visa credit cards in San Francisco. Some secured credit cards can have lower interest rates than unsecured cards do. The Applied Bank Secured Visa Gold, for example, charges only 9.99 percent (although it does charge an annual fee).

Since many people think secured credit cards are only for people with bad credit, it’s easy to understand why they might assume that the interest rates on these cards are astronomically high. But that’s not the reality. Since secured credit cards are backed by your funds, they often have lower interest rates than some unsecured cards. The Applied Bank Secured Visa Gold credit card, for example, carries a 9.99 percent interest rate and a $50 annual fee. Compare that to the Capital One Card for Newcomers, which is designed for people with limited or no credit history. It carries a 24.9 percent interest rate. But in its favor, there is no annual fee and one can earn rewards with this card.

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