Secured or traditional: What’s the best kind of credit card to build credit?

Woman with credit card
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Whether you’re trying to build credit for the first time or climbing your way back after defaulting on a loan, choosing the right type of credit card is vital to your financial health.

For the purpose of building your credit, some credit cards work better than others. The two types we will discuss here are secured credit cards and traditional ones.

Which is better to build credit: Secured or traditional credit card?

This question is often posed to money expert Clark Howard. But before we get to his answer, let’s define what a secured credit card is vs. a traditional one.

What is a secured credit card?

A secured credit card is a card that typically requires that the cardholder to deposit money into an account, which then serves as the credit line for the card. For instance, if you put $1,000 into that account, your credit limit in turn becomes $1,000.

This set-up lets credit card companies know that you’re serious about paying your debts.

But you have to be careful: All secured credit cards are not the same.

“Secured credit cards come in all flavors,” Clark writes. “There are legit ones and there are really crummy ones. I usually find that credit unions are among the best places to get a legitimate secured card.”

What is a traditional credit card?

With a traditional credit card, the borrower is issued a card without having to deposit money in an account. The card will typically have a limit on the amount that can be charged on it based on the the cardholder’s creditworthiness.

Some things that influence a person’s credit limit include income, payment history, credit score and more. As long as you don’t default on any loans and pay your debts on time, your credit builds as your activity is reported to the credit bureaus.

The Clark-approved way to build credit

Clark does have a stance on the best way to establish or rebuild credit with a credit card.


“My preferred way for you to get credit is more of a fast track than applying for a secured credit card: Join a credit union that has a ‘fresh start’ program and apply for their credit card,” he says. “The fresh start program is an informal name for any of a number of initiatives at credit unions that are geared toward people who have never had credit before or need to repair their credit.”

Just starting or starting over with credit? Here are 3 steps to take

1. Join a credit union

If you are not a member of a credit union, join one to take advantage of the perks and cost savings vs. a traditional bank. Here’s how to find and join a credit union.

2. Join their fresh start program

“Like with a secured card, the fresh start program will have you put money on deposit with the credit union,” Clark says. Aside from fresh start, another name for these types are second chance programs.”

“Then the credit union will write you a small loan or issue you a Visa or MasterCard with a small limit against the money you put in savings,” Clark says.

3. Build your credit immediately

Clark says a credit card from a credit union can jump-start your credit from day one. “Unlike a secured card, the credit card from a fresh start program reports as regular credit from day one. And that’s why it’s better,” he says.

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