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A secured card is a credit-building tool and a rewards card allows you to earn cash back and other rewards. The two together allow you to build credit and earn rewards at the same time.
To maximize both, you’ll need to make some smart moves.
With a secured card, your credit line is based on the deposit that you make with the card. So if you make a $200 deposit you may have a credit line of up to $200.
For credit-building purposes, you’ll want to keep balances low and make your payments on-time. And after a year or so of on-time payments, you’ll be able to move up to an unsecured credit card.
Pay the card in full, if you can, to avoid finance charges. You are looking to build up your credit and not spend beyond what you can pay in any given month.
You’ll want to watch out for annual fees as well. Some secured rewards cards charge them and some don’t. You’re looking for the most affordable credit-building card that you can find. So shop wisely.
The whole aim of a rewards card is to urge you to spend and spend. And there are secured rewards cards that offer cash back, or allow you to earn miles and points for purchases made with the card.
For example, with the Discover it Secured you earn 2 percent cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. And you earn 1 percent cash back on all other purchases made with the card. Discover also matches all the cash back you have earned at the end of the first year automatically.
With the SkyPass Visa Secured Card, you earn 1 mile for every $1 you spend in eligible net purchases, which are purchases minus credits and returns. The miles can be redeemed for award travel on Korean Air and SkyTeam partners such as Delta, Air France and KLM.
With Navy Federal nRewards Secured Card, you earn 1 point for every dollar spent with the card and there are no monthly or annual caps on the points you can earn. The points can be redeemed for merchandise, gift cards and cash back. Spending $5,000 earns you $50 cash back.
As tempting as it may be, don’t get caught up chasing rewards. Charging up your card with balances you can’t pay isn’t good for your wallet and charging close to your credit limit is not good for your credit. The emphasis with a secured card, even one with a rewards program, should be on credit building.
So keep balances low, pay your bill on-time and look at any rewards that you pick up as a nice bonus to building and re-building your credit with a secured card.Learn More
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