Amanda Peterson
February 16, 2024
• 5 Minute Read
As tax season rolls around, it's the perfect time to assess your financial situation and consider smart strategies for managing your money. One such strategy involves utilizing secured credit cards to your advantage. Let's delve into how secured credit cards work and how they can be a valuable tool during tax season.
Understanding Secured Credit Cards
Secured credit cards function much like traditional credit cards but with one key difference - they require a security deposit as collateral. This deposit acts as a safety net for the card issuer in case you default on payments. Typically, the amount of your deposit determines your credit limit.
Leveraging Secured Credit Cards during Tax Season
1. Building or Rebuilding Credit:
Tax season is an opportune moment to start or continue your journey toward building or rebuilding your credit. Secured credit cards offer a path to establishing a positive credit history, especially if you have limited or poor credit. By using a secured card responsibly—making timely payments and keeping balances low—you can demonstrate your creditworthiness to lenders.
2. Maximizing Your Refund:
If you're expecting a tax refund, consider using a portion of it to open a secured credit card account. Your refund can serve as the initial deposit, allowing you to obtain a secured card without dipping into your regular income. This investment in your financial future can pay off handsomely as you work toward improving your credit score.
3. Budget-Friendly Spending:
With tax season often bringing additional expenses or windfalls, a secured credit card can help you manage your finances more effectively. Set a budget for your refund or any extra income you receive, and use your secured card for necessary purchases. Many secured cards offer online account management tools that make it easy to track your spending and stay within your budgetary constraints.
4. Emergency Preparedness:
Unexpected expenses can arise at any time, including during tax season. Having a secured credit card on hand provides a valuable safety net for covering emergencies without resorting to high-interest loans or draining your savings. Just ensure you replenish any funds you use from your secured card's credit limit as soon as possible to maintain financial stability.
Top Secured Cards
Keeping the aforementioned tips in mind, here are our top three picks for secured cards from CreditSoup. Whether you are trying to build your credit, or just need somewhere to deposit your tax return, take a look at these cards and determine which one suits your needs best.
- Credit Recommended:
- All Credit Types Considered
- Overdraft Protection
- up to $200 with opt-in and eligible direct deposits
- Monthly Fee
- No monthly fees with eligible direct deposit, otherwise $5 per month
- Activation Fee
- $0
- Direct Deposit Fee
- $0
- ATM Fee
- $0 In-network withdrawal & balance inquiry, $3 Out-of-network withdrawal, $0.50 Out-of-network balance inquiry.
- Credit Recommended
- All Credit Types Considered
Highlights
- Overdraft protection up to $200 with opt-in and eligible direct deposit*
- No monthly fees with eligible direct deposit, otherwise $5 per month
- Earn up to 7% cash back when you buy eGift Cards in the app
- Get your pay up to 2 days early - Get your government benefits up to 4 days early.*
- High-yield savings account, 4.50% APY paid quarterly on savings up to $5,000.*
*Terms and conditions apply. Cards issued by GO2bank, Member FDIC, pursuant to a license from Visa U.S.A., Inc. Overdraft fees may apply. Click Apply Now to learn more.
- Credit Recommended:
- Poor/Limited/No Credit
- Rewards Rate
- 1% Cash Back on payments
- Annual Fee
- $39.00
- Regular APR
- 19.24% (V)
- Cash Advance APR
- 25.24% (V)
- Credit Line
- Minimum refundable deposit of $200.00 up to $2,000.00*
- Credit Recommended
- Poor/Limited/No Credit
Highlights
- Earn 1% Cash Back Rewards on payments made to your First Latitude Secured credit card account.
- Past credit issues shouldn’t prevent you from getting a credit card with great benefits & rewards!
- Choose your own fully-refundable credit line - $200 to $2000 – based on your security deposit.
- Build or rebuild your credit!¹
- Accepted wherever Mastercard® is accepted
- Reports to all 3 credit bureaus
- No minimum credit score required for approval!
- ¹Cardholders who keep their balance low and pay their credit card bill on time every month typically do see an increase in their credit score.
- *See Important Disclosures for complete offer details
Rates & Fees
Tips for Using Secured Credit Cards Wisely
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Pay on Time: Timely payments are crucial for building credit and avoiding late fees or penalty interest rates. Set up automatic payments or reminders to ensure you never miss a due date.
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Keep Balances Low: Aim to utilize only a small portion of your available credit to maintain a healthy credit utilization ratio. Keeping balances low also reduces the risk of overspending and accumulating debt.
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Monitor Your Credit: Regularly review your credit reports and scores to track your progress and detect any errors or suspicious activity. CreditSoup offers a Free Credit Score tool to help you see where you're at.
Conclusion
Tax season presents an excellent opportunity to take control of your financial future, and secured credit cards can play a pivotal role in your strategy. Whether you're looking to establish credit, maximize your refund, or bolster your emergency fund, consider how a secured credit card could benefit you this tax season. With responsible use, it's a frugal choice that can yield lasting financial rewards.
Remember, always consult with a financial advisor or credit counselor to determine the best course of action for your individual circumstances. Here's to a financially savvy tax season!
Editorial Disclaimer: Information in these articles is brought to you by CreditSoup. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles. The information is accurate to the best of our knowledge when posted; however, all credit card information is presented without warranty. Please check the issuer’s website for the most current information.