Credit cards are complex financial tools, and they can be costly financial products as well. However, the biggest hurdle to using a credit card is the application and approval process. You must apply first, which will always entail a credit check, and if you are approved, you get the card. If you aren't approved for the card outright, you may be approved for a card with more flexible terms, which will often require a security deposit.
The Self Visa Credit Card is a secured credit card that lets users place the deposit on their card with a secured installment loan. This removes the need for an upfront deposit of hundreds and the requirement for a sometimes damaging credit check.
Is the Self Visa Credit Card all that it purports to be, though? We're going to look at how the Self Visa Credit Card works, how you can use it without putting down a substantial security deposit, and how it can be used to help you best improve your credit. We'll look at all of the details of the card and how it can help you build or break your credit.
What Is the Self Credit Card and How Does the Self Credit Card Work?
The first thing you'll need to do is to work with Self to open a Credit Builder Account. While there will be no credit check required to open the account, there will be an administrative fee of $15 required to open the account, which is a one-time, non-refundable fee. This then lets them issue a small loan in your name, but you won't get access to the funds of the loan; instead, the bank holds the funds until the loan is paid.
This loan is paid off in monthly installments of about $25 per month until it's paid in full, depending on the loan term. The options for the loan term are either 12 months or 24 months, and they will provide all of the necessary financial disclosures, including APRs and finance information, when you price out your product.
While paying on your installment loan, the installments paid on time go into a fully insured CD, or certificate of deposit, which will earn you interest until the end of the term. When the loan is paid off at the end of the term, you will have access to the funds, and your payment history will have been reported to all three of the main credit reporting bureaus, Experian, TransUnion, and Equifax.
Since your payment history is such a major component of your credit score and overall creditworthiness, Self will report it to all agencies. If you decide to apply for the Self Visa Credit Card at the end of the loan term, your installment loan payments will act as the security deposit on the new card. This means your ability to pay off your installment loan on time and schedule according to the terms of the loan can lead to you getting a larger credit limit than you would have gotten otherwise.
Another primary factor in getting your credit in shape is having various loans and account types. With Self Credit, you are able to maintain two financial products in one easy-to-use model. You will have both an installment loan and a credit card listed on your credit report, and when they're both paid in full according to the terms of the account, it can make your credit look great.
Additional reading: Best Credit Cards for Young Adults
How To Get The Self Visa Credit Card
You will be able to meet the qualification requirements for the Self Visa Credit Card once you accomplish three things. You will need to have saved $100 in your certificate of deposit for your Credit Builder installment loan, which will become your security deposit. In the last three months, you will need to have made three full payments on time, and your account will need to be current and in good standing. This means you cannot have any outstanding fees on your account that have not been settled.
While using the Self Visa Credit Card, you'll be maintaining two active accounts through a single provider. Not only will you have a current credit card and an installment loan, but you'll only need to deal with one company to keep them looking good and your credit improving. This will help you build a more solid credit rating that will have a diverse foundation for the future.
The Self Visa Credit Card is still a secured Visa credit card, which means you'll eventually have a deposit that you've paid on it to secure your credit limit and other features. If you ever decide to close the account, provided it's closed in good standing, you will be able to retrieve that deposit once the account is closed. This can give you a head start on a new secured card, an investment, or anything else you may need a few hundred dollars for.
How To Use The Self Credit Card
The Self Visa Credit Card is normal, just like others you may have used. Once the account has been opened you will have access to all of the features, benefits, and responsibilities that come with the card. It functions as any other open-loop credit card does, with a preset credit limit that cannot be exceeded. Each subsequent purchase is checked against the amount of credit limit remaining before being approved or denied.
Once you receive your card, however, your initial credit limit will be reduced by the annual fee of the Self Visa Credit Card. The card is not free and will cost the account holder $25 yearly, which will be charged directly to the card. So, for example, if you open an account and your initial credit limit is $200, when you first receive the card, you will only have a remaining credit limit of $175 until you make the first payment.
The APR is a little high, near 24%, but so are most of the rates for cards in this class. However, it is a variable rate, so your terms may vary depending on your credit history and overall creditworthiness. A great benefit to the Self Visa Credit Card is that once you have the required $100 minimum saved in your certificate of deposit on the installment loan, you can determine your own credit limit by depositing beyond that initial $100. This means if you have increased your means and need more flexible spending limits, you can deposit more and request a limit increase.
Is The Self Visa Credit Card Right For You?
The Self Visa Credit Card is arguably one of the easiest secured credit cards to get into, even for those who have limited funds for security deposits. Likewise, it is ideal for the consumer whose credit report will likely scare off any potential credit card approval well in advance since it allows them an affordable credit vehicle to begin patching up bad credit or building a good credit history from the ground up.
Even though there are finance charges baked into the installment loan, the benefits of the Self Visa Credit Card mean you can still come out ahead. The prerequisite Credit Builder Account will cost you between $50 and $120 for finance charges, so if you also add in the $25 annual fee the Self Visa Credit Card needs, you're still well below the typical deposit needed for most secured credit cards of at least $200. For those looking to build or repair credit on a tight budget, the Self Visa Credit Card could be an ideal option.
Since with traditional secured cards, you pay the deposit and get access to your card and your credit immediately; they don't have the ability to help build a positive payment history. Since the Self Visa Credit Card will require regular installment payments to build up the deposit needed for the credit line, you have a built-in mechanism for good payment history.
When it comes down to it, the Self Visa Credit Card is a really nice option for those who may not be able to afford the $100-$200 deposit that will come with traditional secured credit cards. Millions of people need the requirements lowered, or the barriers softened to getting into a decent secured card, and the Self Visa Credit Card helps them to accomplish this.
It's not the best card out there, but it's one of the best that doesn't even require a credit check to get started. Not many other credit card companies can say that, and the installment loan deposit plan only makes the card more accessible to the consumers who need its benefits the most. Improving credit shouldn't have a steep price on it since spending outside one's means is often how debt and bad credit happen in the first place. For a secured card that you can get into easily and over time, the Self Visa Credit Card is hard to beat.
Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He's been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.