Is it better to get a secured VISA with a $1,500 limit or a $200 limit if I'm trying to rebuild my credit?

Question

What are the pros and cons of both?

Answer 1

The cons would be if you cannot trust yourself to handle credit wisely, then get the $200 limit.

If you know you can handle credit now, my opinion - don't just get a $200 secured card. Since the credit limit would be so low, a full tank of gas would throw you into a higher utilization.

If it were me, I would divide the money up and get a couple secured cards. Maybe $750 each or one at $500 the other at $1000.

Most creditors, but not all, report secured cards without the secured notation on your credit reports. Which means the cards will look, and be scored, like regular cards and not secured.
You would have to ask the creditor how they report secured cards.

Before you commit to a secured card with a creditor, find out if the card will unsecure and about how long it takes.
Some creditors offer cards that unsecure, and generally fairly fast (within a year)
Other creditors will "never" unsecure a card. They generally require that you close it and open a new unsecured account. You would then not only be losing the history on the closed card account, you would also take a hit for the new account. Both of which would hurt especially if you have a fairly small file.

I wouldn't suggest leaving a balance on them. Pay in full when you get the statement. Not only will you not be paying interest, you would also be creating a good payment habit.

Leave the "payment history" for when you get a card that will give you a 0% promo interest rate.
Along with major cards, there are some store cards that do give 0% promos when you make a selected purchase or a purchase over a certain amount.

Answer 2

The higher your outstanding credit, the lower your score will be. But in this case, the difference probably wont hurt. The better idea is to get the 1500, and use it as if it has a lower limit. DO NOT PAY IT OFF EVERY MONTH. They would rather see a pattern of payment over time than payoff every month. That's why you have to be careful when you use the card. Make up your own limit...say 500 bucks. When you get there, put the card away until you pay it down. ALWAYS pay more than the minimum payment.

Answer 3

I think go for the 200$ limit if you must. I personally do not like credit cards. I have a frind who used her credit card for 10,000$.
She did not know about the interest ( i know that is strange). She was paying back 500$ per month. 4 years later, she is still paying back (by now she paid more than 24,000 since somewhere in between she payed a good amount into the loan). She keeps asking the credit card company how much she owes them and they keep saying 10,000.
She paid back more than double of what she borrowed and it is like water passing through a strainer.
I do not like credit cards at all, but if you must have 1 , I would go for the $200. When something is there, one is tempted to use it. You will soon find yourself where you were before.

Answer 4

I'd get the card with the $200 limit, and pay it off almost every month. Let them make a little money off of you. They like that. And they will come back with better rates and better card offers in the future. Mostly the low limit means you can't run it up to impossible to pay off levels.
And from what I understand secured cards get you a lower credit score. They also require you pre-pay some amount... that's the "secured" part of that card. I'd keep that security deposit in the back earning interest. But, if you know you need to buy things more that $200 often, you can't go with the lower limit card. You'll have to scrape up that deposit in order get the card in the first place, and then pay off that higher balance as often as possible.

Answer 5

Avoid secured credit cards. Most report your status as secured and this does nothing to help build/rebuild your credit.

Try Orchard Bank for an unsecured credit card. They have a low interest rate (14.90, good for a sub prime card), low annual fee, no hidden fees and if you manage your account properly, they give excellent credit limit increases.