Green Dot Corporation, better known for its prepaid debit cards, has launched a Visa secured credit card that's designed to help consumers who have little to no credit history, or who have low credit scores, the opportunity to build their credit while having the benefits of a credit card.
A secured credit card is a credit card that's tied to a savings account, which acts as collateral on the card's available credit. The credit limit on the credit card is then a percentage of what's in the savings account. Some cards stipulate that the card limit is equal to the amount in the savings account.
For Green Dot's secured Visa, cardholders don't even need to have a bank account. Green Dot manages the security deposit aspect of the card as well. In order to get the card, prospective cardholders apply, and if approved, Green Dot will mail them a credit card and tell them what their maximum credit limit will be. This will range anywhere from $200 to $1000. The pre-qualification has no impact on the applicant's credit score.
Once the cardholder receives the card, they have to make a security deposit on the card. This amount will then equal the credit limit on the card. This means that if someone is approved for a $500 credit limit, they need to make a $500 deposit. If they don't have $500 but do have the minimum $200 needed to open the card, they can just deposit the $200, and their credit limit will go down to match the amount of their security deposit.
Cardholders can make their security deposits with cash at retailers like CVS, Walgreens, 7-Eleven, Dollar General and Walmart. They can also mail in a check to Green Dot. While making a security deposit at a retailer means that the cardholder can use the card immediately, it also incurs a $4.95 fee for the convenience of doing so. Most retailers will also only accept no more than $500; Walmart will accept deposits of $1000. Cardholders can only make one security deposit at a store, so if the cardholder is approved for a credit limit greater than $500 and makes a cash deposit at a retailer that only accepts a maximum of $500, they need to pay the difference with a check in order to get the full credit limit.
Paying the security deposit at a retailer isn't the only option. Cardholders can also make a deposit using a check, but that requires having a checking account, and it will take ten days from the day Green Dot receives it in order to process and get the money into the account.
Beyond that, the card acts like a regular Visa and is accepted globally wherever Visa is accepted. Cardholders are expected to make regular payments, as is with an unsecured credit cards, and that payment history is reported to the three credit bureaus. If cardholders use the card responsibly and make payments on time, their credit scores may improve. Over time, this means that they can hopefully qualify for unsecured credit cards that don't require collateral.
The terms on this card are relatively straightforward. The APR is 19.99 percent, and the annual fee is $39. This fee is assessed immediately, which can impact the amount of available credit a cardholder starts out with. If they open their card account with the minimum $200 security deposit, their available credit will only be $161 until they pay the annual fee. There are fees for cash advances, foreign transactions, late payments and returned payments.
Cardholders will be able to manage their accounts and make payments online.
"The Green Dot Platinum Visa Secured Credit Card is just another way Green Dot Bank is helping to open the door to financial inclusion for millions of low and moderate income Americans," said Lew Goodwin, President of Green Dot Bank in a statement.