Q: Can you tell me which banks have secured cards available? I was hoping on getting one from my current bank (Chase) but I checked and they don’t appear to offer any. I called three other major banks and they did not offer them either.
A: Very few banks in general offer secured credit cards.
Why? Because it’s a less profitable business model for banks in recent years.
The reason for this is because with the Federal Reserve keeping interest rates at around 0%, the banks are limited in what they can earn off the money you deposit with them. That’s why the interest rates on your checking and savings accounts are so dismal.
This same predicament applies to secured credit cards. Back before the financial crash, these types of cards were profitable for banks because they could make money off of your security deposits.
But now, it’s hard for them to make anything with interest rates so low and new government regulations which limit how much money they can lend out. Another thing that limits the profitability of these cards is the small credit lines involved, which are typically the same amount as customers keep on deposit. The banks charge interest when cards are used but since it’s on such a small amount of money (usually about $500) they simply can’t make enough money to offset their operating costs. The only good thing about this business model is that losses are close to zero, since the bank can just keep your deposit if you ever fail to pay your credit card bill.
The result of all of this long term interest rate situation? After 2009, the majority of secured cards on the market were discontinued. As a result, those with bad credit looking to rebuild didn’t have as many options.
Which banks do and don’t offer secured cards in 2016?
- Most regional banks no longer offer them. KeyBank, Sovereign Bank, Regions, TD Bank, BB&T, PNC, Citizens Bank, and SunTrust have all axed their programs.
- Most credit unions continue to offer them. If you’re able and willing to join a credit union, there’s a good chance you can get a basic vanilla credit card from your local credit union that is secured.
- Some national banks still have them. Capital One is the most popular and highest rated. USAA, BofA, Wells Fargo, and Citi also have them but they’re not promoted much.
As needed, I will update this list of banks that offer secured credit cards. However I don’t anticipate it changing much in the near future because the Federal Reserve still hasn’t signaled when they expect to raise interest rates (which might make these cards profitable again and entice more issuers to enter the fray).
This article was written or last updated January 5, 2016