The American Express Secured Platinum credit card from USAA is a good card for anyone looking build or rebuild a credit history, but it might not offer the flexibility and rewards of other credit cards. For many years very few people needed secured credit cards, but recent tightening of bank lending standards have caused these cards to surge in popularity over the past several years.
The card works by having its customers make a deposit (minimum of $250, maximum of $5,000 at the present time) into a two year CD with USAA. While the interest rate on this investment isn’t anything to write home about, it is better than the rates offered by many similar cards that require cardholders to make deposits into a savings or escrow account. The amount of the deposit is the amount of the monthly credit limit on the card. For example, a person who deposits $500 can only charge $500 to the card before it stops working for the pay period.
USAA Secured Platinum American Express Card
- It’s a real credit card – not a prepaid or debit card, that helps you build or improve your credit score.
- When you apply – you’ll also be opening a USAA 2-year Certificate of Deposit (CD), an interest-earning deposit account that has a two-year term and a $250-minimum initial deposit.
- Your CD is a security deposit – the money you put in upfront, from $250 to $5,000, is the card’s credit limit.
- Earn interest on your CD – your deposit is guaranteed to grow. Plus the money is yours to keep as long as you don’t default on your payments.
- Start building your credit – opening a CD lets you get a credit card even if you don’t have a credit history or have bad credit.
- Before starting your application, USAA will ask you a few questions to establish your online access and eligibility with USAA.
- If you are not eligible, USAA credit cards and other products may still be available.
Other than this, the card acts just as a non-secured credit card. Cardholders may make any purchase they want within their credit limit. If the balance is not paid within the charge period, the cardholder will pay a 9.9% annual fee. In addition, there is a $35 annual fee, but considering the (likely) low credit limit, USAA really has no other way to make money off the card.
In the event the borrower defaults, money is taken from the CD in order to pay off the balance. It should be noted that the money is being held in a CD and cannot be taken out in order to pay off the balance of the card unless the borrower defaults. This means that a borrower will have to make their minimum monthly payments and pay interest the following month, even though he or she supposedly has money in the bank.
At the end of two years, the borrower can choose to keep the money in the CD for another two years and renew the card, or take their deposit (along with any interest earned) and apply for a different card. This card can be ideal for someone looking to repair their credit or for a young student looking to build their credit history. More experienced borrowers, however, should keep looking.