How to Choose a Credit Builder Card When You're Rebuilding Credit
Rebuilding credit can feel overwhelming, but selecting the right credit building tool is the first step toward financial recovery. The good news is that there are many tools and strategies available today to help you improve your credit. The key is finding the right one that fits your unique situation.
In this guide, we'll walk through your options and what to look for when choosing one.
What to Look For in a Credit Builder Card
The main goal of a credit builder card is to help you create a positive payment history. Using the card responsibly and making on-time payments can help improve your credit score over time.
Here are some key features to look for when you compare your options:
Reports to All Three Credit Bureaus: This is the most important feature. To get the full benefit, you need your positive payment history reported to the major credit bureaus: Experian, Equifax, and TransUnion.¹
Fees Breakdown: Credit cards can come with different fees, such as annual fees, monthly fees, late fees, etc. It’s important to be aware of fees and what drives them when considering which card product works best for you.²
Common Types of Credit Builder Cards
There are a few different types of cards designed for people who are looking to improve their credit score.
Secured Credit Cards
Secured credit cards are a very common tool for building credit.
How they work: You provide a refundable security deposit, which is usually a few hundred dollars. This deposit typically becomes your credit limit.³ For example, if you deposit $200, your credit limit will be $200. You use the card for small purchases and pay the bill on time each month.
Who they’re good for: Secured cards are a good option for people who have cash available for the deposit and want a straightforward way to start building a positive payment history.
Things to consider: The upfront cash required for the security deposit may not be available for everyone’s financial situation.
Unsecured Credit Cards
An unsecured credit card means you don’t have to pay a security deposit to fund your entire credit limit.
How they work: You apply and, if approved, you get a credit limit without having to fund the credit limit in full.
Who they’re good for: This can be a good choice for those who are eligible for approval.
Things to consider: Chances of approval may be lower than a secured credit card.⁴
A Different Approach: Meet the Perpay Credit Card
The Perpay Credit Card* is an unsecured credit card powered by your paycheck. You can access the Card when you set up a recurring direct deposit payment from your paycheck
No Security Deposit: Use the Perpay™ Credit Card as soon as you receive it, and keep your cash on hand for when you need it. Access up to a $1,500 credit limit, without needing to fund that limit in full.
Use It Anywhere: It’s a Mastercard, so you can use it for everyday purchases like gas, groceries, and bills—anywhere Mastercard is accepted.
Build Credit with Automatic Transfers**: Automatic transfers from your paycheck help you manage payments without stress. This can help you build a positive payment history, which is then reported to all three credit bureaus to help you build your score.***
As a certified B Corporation, Perpay is committed to high standards of performance, accountability, and transparency.
Finding Your Best Path Forward
Choosing the option that works best for you is a big step toward a healthier financial future. Whether it's a secured card that fits your situation or a unique solution like the Perpay Credit Card, the most important thing is to find a tool that helps you make consistent, on-time payments. By doing so, you can take control of your credit and build the future you deserve.
Frequently Asked Questions (FAQs)
How long does it take to rebuild my credit with a credit builder card? It varies for everyone, but a great first step is adding positive information to your credit history through consistent, on-time payments.⁵
What happens to my security deposit with a secured card? If you manage your account responsibly and close it in good standing, or if the company upgrades you to an unsecured card, you will get your security deposit back.⁶
Does applying for the Perpay Credit Card hurt my credit? Applying for a Perpay Credit Card will not affect your FICO® or Vantage® scores. However, we may obtain information from Clarity which may affect your credit profile with this alternative credit bureau.
Ready to start your credit-building journey?
Sources
- https://www.cnbc.com/select/what-are-the-three-credit-bureaus/
- https://www.cnbc.com/select/how-to-avoid-common-credit-card-fees/
- https://www.investopedia.com/terms/s/securedcard.asp
- https://www.bankrate.com/credit-cards/bad-credit/unsecured-bad-credit/
- https://www.experian.com/blogs/ask-experian/how-long-does-it-take-to-rebuild-credit/
- https://www.discover.com/credit-cards/card-smarts/secured-credit-card-myths-and-realities/
*The Perpay Credit Card is subject to credit approval. Not available to residents of New Hampshire. The Perpay Credit Card is issued by Celtic Bank. The Perpay Credit Card is an unsecured credit card with eligibility requirements such as ongoing payroll direct deposits. See our Direct Deposit Terms and Cardholder Agreement for more information.
**With automatic transfers enabled.
*** On-time payment history can have a positive impact on your credit score. Improvement in your credit score is dependent on your specific situation and financial behavior. Failure to make on time payments by the payment due date may result in delinquent payment reporting to credit bureaus which may negatively impact your credit score. This product will not remove negative credit history from your credit report. Impact on your credit may vary, as credit scores are independently determined by credit bureaus based on a number of factors. Perpay will report your transactions to Experian®, Equifax®, and TransUnion®. Credit score improvement is not guaranteed.