The Open Sky Secured Visa Card Can Help You Rebuild Your Credit

By Matthew


The Open Sky Secured Visa card is similar to a traditional credit card with one major difference: Since the product is designed for people who need to rebuild their credit, a deposit is necessary to "secure" the purchases made with the card.

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Here's why a secured credit card, and the Open Sky Secured Visa card in particular, can be an excellent choice to build or rebuild your credit.

Not quite a prepaid card, but not a credit card eitherA secured credit card is a unique product, as it has similarities to both prepaid (debit) cards, as well as traditional debit cards.

Like a prepaid card, credit history is generally not a factor, since a deposit is required to open the account -- the amount of which will be equal to your card's credit limit. However, instead of purchases being deducted from the money you deposit, your money is instead placed into an account in order to "secure" the purchases you make on the card.

For example, if you deposit $500, then you'll receive a secured credit card with a $500 limit. As you make purchases, you'll receive a statement at the end of the month, and make a payment just like with a normal credit card. Your original $500 remains untouched for as long as you keep the card open.

The benefit to this arrangement is that your activity on the card is reported to the major credit bureaus just like a traditional credit card, and an on-time payment history can help you build or reestablish credit. In my opinion, this is the biggest advantage to using a secured credit card as opposed to a prepaid card.

How does it work, and how much does it cost?As I mentioned, in order to open an Open Sky account, a deposit is required of between $200 and $3,000, which can be made by bank transfer, wire, Western Union, or by mailing a check or money order. And customers may be eligible for a credit limit increase without an additional deposit after establishing a track record of responsible usage of the card. As far as the cost goes, the rates and fees of the Open Sky Secured Visa card are competitive. The card has a 17.5% APR on purchases and balance transfers and comes with a $29 annual fee.

Many other popular secured cards come with higher rates, such as the Capital One Secured Card, which has no annual fee but a 24.9% APR. The "no annual fee" benefit is nice, but if you carry a $500 average balance on your card, the higher interest rate will cost you an extra $37 per year. Many others charge more on both interest and fees, such as the Bank of America Secured Card, which charges an APR of 20.24% and costs $39 annually.

Potential drawbacksDespite the reasons in favor of getting the card, there are a few negative aspects. Most significantly, the bank issuing the card (Capital Bank) doesn't have an unsecured, or traditional, credit card product at this time. If you have a secured card from one of the larger banks mentioned above, it may be possible to eventually move to an unsecured card without having to reapply at another institution.

This doesn't have to be a deal-breaker, but it does add an inconvenience once your credit improves enough to where you don't need a secured card anymore.

Aside from that, most of the major complaints on the card have to do with the speed at which various things happen. Many consumers say the card itself takes several weeks to arrive, and that there is a lengthy hold placed on deposits before the funds become available.

The verdictAs long as you use the Open Sky Secured Visa card responsibly, by not maxing out your credit limit and making payments in a timely manner, the drawbacks I mentioned shouldn't matter to you too much. And, if you can deal with the fact that eventually you may need to switch financial institutions once you graduate to an unsecured card, the Open Sky Secured Visa card offers an excellent way to get started on the path to better credit -- and at a lower price than many competitors.

The article The Open Sky Secured Visa Card Can Help You Rebuild Your Credit originally appeared on

Matthew Frankel owns shares of Bank of America. The Motley Fool recommends Bank of America and Visa. The Motley Fool owns shares of Bank of America, Capital One Financial., and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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