The credit score is fundamental in the US because, for banks, it’s a measure of your ability to pay. If you have no credit history or a bad credit score (below 579), you will not be able to get a loan anywhere except at institutions that offer payday loans at 200% or more APR.
Thus, credit history is essential, and to build it, you have to pay off loans. But as long as you don’t have a credit history, you can’t get a loan.
What can you do to break this vicious circle? One option is to get a secured credit card.
Are $2,000 Credit Limit Credit Cards secured or unsecured?
First, let’s define the difference between the two concepts. A secured loan is one for which you have to provide collateral. If you don’t have to give collateral and the money is just given to you based on a good credit score, it’s an unsecured loan.
A $2,000 Credit Limit Credit Card is secured because you must provide the bank with a deposit of $2,000. It’s like a $2,000 loan. Besides, you should understand that the deposit amount determines your credit limit; it can be $500, $700, or $1400 – whatever you decide. So, for example, if you have deposited $500 to the bank, you’ll have a $500 credit limit.
What does it mean for me?
Imagine you have $2000 and want to build a credit history. You decide to get a credit card, choose the right financial institution, and pay the $2,000 deposit in cash or transfer it from your bank account. In fact, it means that you’ve applied for a $2,000 loan.
Usually, within a day or two, this money is deposited on your credit card and becomes an available credit limit. After that, you can spend it on whatever you want, but it’s still a loan, which means mandatory monthly payments are involved.
It’s important to understand that the monthly “credit” amount is not the entire $2,000 you deposited in the beginning but only the amount you spent. So, for example, if you spent $500 in a month and have a card at 12% APR, you would have to pay back the $500 you spent + $5 interest at the end of the month.
How does this affect your credit score?
The basis of your credit score (35%) is the regular monthly payments. Your financial institution will report to the credit bureau each month that you are making payments on time, and your credit score will gradually increase.
When your credit history is built, you can close that account and get your first deposit ($2,000 in our example) back.
Is it worth applying for a $2,000 credit limit Credit Card?
There are only a few options for building a credit history in America: take out a student loan, set up a joint account, get a loan with a co-signer, or receive a secured credit card. If the first two options are unavailable, you’ll have to use the third one.
You should understand that the main disadvantage of this type of card is a high annual interest rate, an average of 18%. Also, you must have some money to deposit because this amount usually stays with the bank for six months or more until you close the account.
So this card is only worth taking when you already have a steady income and a commitment to pay high interest on the loan. Below we will give you some recommendations on using such a card to get rid of it as quickly as possible and get approved for an unsecured credit card.
Best credit cards with a $2,000 limit guaranteed approval
We found three financial institutions that provide the best-secured credit cards according to our criteria. Read this comparison very carefully and choose the option that suits you best.
It is important to note that you can get such a card from many financial institutions with no problem because they do not risk anything due to the collateral.
The U.S. Bank Secured Visa® Card
First, we’ll examine a card from one of the biggest banks in the United States with a deposit from $300 to $5,000. You don’t have to pay an annual fee or have a credit history to use it.
The APR on this card is 25.49%, which is high enough for these credit cards. Also, if you don’t pay your monthly bill on time, you can be charged a late fee of up to $41.
The pros of this card are as follows:
- No annual fees.
- Anyone can get such a card, even with a bad credit score.
- The money is available for use within one or two days after the deposit is placed.
Compared to other financial institutions, the card from this bank has two significant disadvantages:
- A very high-interest rate.
- No cash back and bonuses.
The Secured Sable ONE Credit Card
The credit card with the lowest annual percentage of 11.74% is available to anyone ready to deposit $500 to $10,000. There is no annual fee for this card, and after four months of active use, you can try to apply for the unsecured card and withdraw your deposit if approved.
The advantages of this card are these::
- No additional fees.
- Low-interest rate.
- You can use the money deposited on the same day.
- In addition, it has a cashback of 2% on specific categories of goods.
The only disadvantage of this card is that you will have to pay a foreign fee if you transfer the deposit from your foreign bank card.
The Discover it® Secured Credit Card
It’s another card available to everyone without a credit history check. Its annual rate is 24.99%, but you can pay only 10.99% for the first six months.
Also, after seven months of using the card, you can try to apply for an unsecured card and get your deposit back if approved.
To qualify for the card, you must deposit $200 to $2,500, which will be your credit limit. Discover doesn’t charge a late fee on the first late payment, nor do you have to pay an annual fee.
Users of this credit card point to its advantages these factors:
- A minimum deposit of $200 is available to almost everyone.
- The 2% cashback on specific categories of goods.
- An introductory period with the most favorable loan rate.
- The possibility to spend funds deposited within the same day.
It has only one disadvantage – when the first six months pass, the annual rate on the card is very high.
Our selection requirements
To help you recognize which credit cards are a good choice, we want to share with you our selection criteria.
They include:
- Limit. We understand that not everyone can make a $2,000 deposit, so we picked cards with a minimum limit of $200. Be sure to look at this div and take cards with such a limit that you will be able to give that money away and not need it for at least six months.
- Annual fee. Some financial institutions ask for a yearly fee for using the card. This is an unnecessary expense that you can avoid.
- APR. The most important criterion in any loan. Be sure to pay attention to it and try to choose credit cards with the lowest APR.
- Maximum deposit. Your credit history will improve faster if you use a credit card with a $10,000 limit rather than $1,000.
- Pros and cons. This last factor helps us summarize the entire review and objectively assess each financial institution.
How to increase your chances of getting the maximum credit card limit?
Several criteria affect your credit limit on an unsecured credit card:
- Your income.
- The credit history.
- Your expenses and debts.
- Credit limits on another card you already have.
Your credit limit is restricted to your deposit amount if you use a secured credit card.
However, it’s essential to realize that the sooner you can get an unsecured credit card instead of the secured one, the better. Those minimum four months of using it before applying for an unsecured card can be a great time to create the proper financial habits that will allow you to increase your credit limit and avoid the debt trap.
Make sure always to pay bills on time
As we said before, 35% of your credit score depends on you making your regular payments on time. This is because financial institutions will report to the credit bureaus when you pay everything promptly and when you miss payments.
Every late payment of your 2,000 dollar loan is a loss of points in your credit score.
Set up autopayments to ensure you don’t miss your bill payment day. If that’s not possible, put a reminder on your calendar that you must make a monthly payment.
To reassure yourself, ask your family, friends, or partner to remind you to make your monthly payment on this date. This way, you won’t forget that critical deadline.
Use 30% or less of your available credit
Banks can’t assess your reliability based on income alone because many people spend much more than they earn. That’s why they look closely at the amount of 2,000 dollar loan you use.
Their logic is simple – if you use a lot of credit money, you’re spending a lot, and you won’t be able to pay off your loans. This is bad for your credit score.
However, if your credit card spending doesn’t exceed 30% of your credit limit, you’re good with your finances, and the banks can trust you. After all, using not all the money available is a good habit that will help you learn how to save in the future.
Pay down your debts
Any credit is only suitable for your credit history if you pay it off on time. But getting a secured credit card doesn’t make sense if you have unpaid debts, as it won’t help rebuild a credit history damaged by other financial obligations.
With that in mind, the plan should be to pay off all your loans and debts first and only then get a secured credit card to build a better credit history.
Save money for the future
Always try to save at least 10-20% of your income for the future. First, it’s just a good habit that can save your life in emergencies. Second, people with savings are statistically less likely to take out loans and have financial stress.
And finally, with a $2,000 credit card limit for bad credit, having savings means not getting into a situation where you can’t afford your monthly payment. If you have some extra money you’re saving for the future, you won’t ruin your credit history with a late fee – and that’s the most important thing about any loan.
To make the process easier, save a part of your money as soon as you receive your paycheck. Do not save a considerable amount at once; otherwise, you will be taking money from your savings a couple of weeks after you have deposited it. Instead, start with small amounts – first, save 5% of your income, then 10%, then 20%.
The more you save and invest, the safer you can feel in this world.
Make good financial decisions
Being able to make sound financial decisions is also a skill. Try never to borrow money or take out a credit card without calculating how you will pay it back.
You should understand basic terms, such as APR and hidden fees, so you know what conditions you’re getting your money on.
Also, think several times before you take out a loan. Impulsive decisions don’t lead to good results, so look at the pros and cons before you say “yes” to loans.
If you’re not confident in yourself as a person who can make good financial decisions, talk to your loved ones who know how to manage money, watch educational videos on YouTube, or read articles on our blog. Remember, you have to understand what you’re doing. If you don’t understand the terms you are taking out a loan and how you will pay it back, abandon the idea as it would be a wrong financial decision.
Conclusion
A $2,000 credit card limit for bad credit is one of the few options to improve your credit history or build it up from scratch.
It works on a simple principle – you give the bank a deposit of some amount, and that deposit becomes your credit limit. Because the bank receives a deposit to guarantee you will get the money back, you can get such a card without any problems in just a few minutes.
The annual interest rate is the most important thing to consider when choosing a credit card. The higher the rate, the more expensive the loan will be. Try to select credit cards with a minimal interest rate.
It is essential to understand that when you use such a card, you must pay back the total amount spent in the month and the interest on the loan. Therefore, try not to waste more than 30% of your available limit per month; this way, it will be easier for you to make monthly payments, and banks will consider you a more reliable borrower.
