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How to Build Credit

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How to Build Credit

Start by becoming an authorized user, or by obtaining a credit-builder loan and secured credit cards.

Written by Erin El Issa Senior Writer Data analysis, personal finance credit cards Erin El Issa writes data-driven research on personal finances, credit cards investment, travel, banking and student loans. She is fascinated by numbers and strives to simplify data sets in order to help consumers improve their financial lives. Before becoming a Nerd during 2014, she worked as a tax accountant and freelance personal financial writer. Erin's work has been mentioned as a result by The New York Times, CNBC as well as on the "Today" programme, Forbes and elsewhere. In her spare moments, Erin reads voraciously and is unable to keep up with her two kids. Her home is in Ypsilanti, Michigan.

and Bev O'Shea personal finance writer | MSN Money, Credit.com, Atlanta Journal-Constitution, Orlando Sentinel Bev O'Shea is a former NerdWallet authority on consumer credit, scams and identity theft. She holds a bachelor's level degree in journalism from Auburn University and a master's in education from Georgia State University. Before coming to NerdWallet, she worked for daily newspapers, MSN Money and Credit.com. Her work has been featured on The New York Times, The Washington Post, the Los Angeles Times, MarketWatch, USA Today, MSN Money and other publications. Twitter: @BeverlyOShea.

Updated February 2, 2023

Written by Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, financial management and debt Kathy Hinson leads the Core Personal Finance team at NerdWallet. Prior to joining NerdWallet, she worked for 18 years at The Oregonian in Portland in positions such as copy desk chief and team editor and designer. Previous experience included the editing of copy and news for several Southern California newspapers, including the Los Angeles Times. She received a bachelor's degree in journalism and mass communications in the University of Iowa.

A majority of the items featured on this page are from our partners, who pay us. This influences which products we review and where and how the product is featured on a page. However, this does not influence our opinions. Our opinions are our own. Here's a list and .

Building credit can be tricky. If you do not have a credit score, it's difficult to secure a loan, a credit card, or maybe even an apartment.

But how do you expect to establish a record of credit-worthy repayment when no one is willing to give credit at all?

Know how your credit is assessed

Check your score for free and the variables that affect it, as well as tips on how to keep building.

Several tools can help you :

If you're looking to get credit card, you could begin by obtaining an secured credit card or co-signed card. You can also ask to be an on the card of someone else.

If you're looking to establish credit without using a credit card, consider credit-builder loan or a secured loan or a co-signed loan. There are other methods to make utilities, rent and phone payments to build credit. Certain of these methods are completely free, while others require costs.

Here's a look at credit-building tools and how you can use these tools to earn .

Get a secured credit card

If you're trying to build your credit score from scratch, you'll likely require an . Secured cards are backed by a cash deposit made upfront. The amount you deposit is typically similar to the credit limit. The maximum and minimum amount you can deposit is determined by card. Certain cards require a minimum deposit of $200. Some companies , like Avant, Deserve and Petal now offer that don't need the requirement of .

You'll use the card like any other credit card: Buy things, pay within or before when due, incur charges if you do not pay your balance in full. The deposit will be returned at the time you close the account.

NerdWallet regularly evaluates and ranks various options.

Secured credit cards don't have the intention to be used forever. The intention behind a secured card is to build your credit so that you can qualify for an unsecure card -- a card that does not require a deposit and has better advantages. Select a secured credit card that has the lowest annual cost and ensure it is reporting payment data to all , Equifax, Experian and TransUnion. Your credit score is constructed by the information you get from your credit reports; cards that report to all three bureaus permit you to create an extensive credit history.

Return to the top

Get a credit-builder product or a secured loan

A is exactly what it sounds like -- its sole purpose is to help people build credit.

Typically the loan amount is held in the hands of your lender in a bank account, and is not transferred to you until the loan is paid back. It's a forced savings plan of sorts and the payments you make will be reported to the credit bureaus. These loans are typically provided by credit unions or community banks. They can also be found on the internet, and so does .

The line of credit is $500. credit, which is specifically designed to build credit.

Another option: If you have funds in deposit at the credit union or bank inquire about a secured loan for credit-building. With these, the collateral is money in your account or in a certificate of deposit. The interest rate is generally a bit more than the interest you're making on the account but it may be significantly less than the alternatives.

Back to top

Use a co-signer

You can also get a loan or an unsecure credit card by co-signing with the co-signer. Be sure both of you understand that the co-signer is in charge of the entire amount due if you fail to pay.

From top to bottom

Become an authorized user

A close family member or other may be willing to allow you to be a beneficiary account on their card. In this way, the card's payment history to your credit file and you'll need an authorized user with a a long history of paying promptly. In addition, being designated as an authorized user can reduce the amount of time needed to make a . It is particularly beneficial for building credit.

You don't need to utilize -- or even possess the credit card to gain the benefits of becoming an authorized customer.

Request the primary cardholder to discover if the card issuer is able to report authorized user activities to credit bureaus. The activity is generally reported, but you'll want to make sure otherwise, your efforts to build credit could be in vain.

You should come to an agreement regarding how you'll utilize the card before being designated as an authorized user, and be ready to pay your share when you strike.

From top to bottom

Credit is available for the bills you pay

like Rental Kharma such as Rental Kharma LevelCredit like Rental Kharma and LevelCredit, take a charge you are already paying and place it on the credit file, helping to establish a good track record of punctual payments. Not every credit score takes the payments into consideration however, some do and that may suffice to secure a loan or credit line that establishes your credit score for all lenders.

offers a way to have your utility and cell phone bills reflected in your credit report with the credit bureau. It is important to note that the effect is limited only to your credit report through Experian -- and the credit scores calculated on it.

From top to bottom

Develop good credit habits

and a history of on-time payments.

To have a FICO score, you must have at minimum one account that's been in existence for at least six months and at least one creditor reporting your activities to credit bureaus in the past six months. A score, which is FICO's most significant competitor, can be generated quicker.

Use these credit-building tips to increase your credit score

Make sure to pay your bills promptly and pay at least the minimum you can . Making your on time for credit cards or loan payments punctually, each time is the most crucial step you can take to build your score. If you're able to spend more money than you must amount, that is also helpful for your score.

If you use credit cards, ensure that your credit utilization low -it is the percentage of your credit limit that you use. We recommend keeping your credit utilization at or below 30% for all credit cards as often as you can. The lower your usage the better for your credit score.

Beware of applying for multiple credit accounts at the same time. Applications for credit can cause a small, temporary drop in your score. Multiple applications can cause significant damage. NerdWallet suggests spacing your applications by about six months in the event that you are able, and researching the for your needs before you apply. Note that multiple applications for auto loans or mortgages in a short span of time will be grouped into one in the form of " ."

Maintain your credit card accounts open. If you do not have an important reason to shut down the account, such as a high annual fee or slow customer support, think about keeping it open. You can also explore downgrading it or moving the credit limit to another card. Closing an account may affect your credit utilization and reduce your average account age.

Return to the top

Make sure you check your credit scores as well as reports

A credit report provides a record of your credit usage previously. Your credit scores predict how you'll deal with credit in the future by analyzing the data in the credit report. It is important to keep track of both for any errors as well as to see your credit building efforts pay off.

NerdWallet provides a service from TransUnion. You can also utilize educational tools, such as NerdWallet's tool to determine how the financial decisions you make can affect your score.

A number of credit card issuers offer FICO scores on customers monthly statements, and permit access online as well. Some card issuers offer scores for free to everyone whether cardholder or not.

Request your credit reports and review them for any mistakes and discrepancies. From December 2023 to the present you are able to check your credit reports free of charge every week by . Disput any errors in your credit report you spot that may be lowering your scores.

Are you looking for nerdy information that is tailored to your needs? All your money will be in one view, and get tailored insights to make the most of it.

The authors' bios: Erin El Issa is an expert on credit cards and a writer for studies at NerdWallet. The work she has written for NerdWallet was highlighted in USA Today, U.S. News and MarketWatch.

Bev O'Shea was a credit writer at NerdWallet. Her work was published in publications such as the New York Times, Washington Post, MarketWatch and elsewhere.

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Prepaid Debit Cards Are Popular But they do have some drawbacks

Advertiser disclosure You're our first priority. Everytime. We believe that everyone should be able to make financial decisions without hesitation. While our website does not feature every business or financial product on the market, we're proud that the guidance we offer as well as the advice we provide and the tools we develop are objective, independent, straightforward -- and free. How do we earn money? Our partners pay us. This could influence which products we review and write about (and where those products appear on the site) however it in no way affects our suggestions or recommendations that are based on many hours of study. Our partners are not able to pay us to guarantee favorable reviews of their products or services. .

Prepaid Debit Cards Are Popular But they do have some drawbacks

By Spencer Tierney Senior Writer | Certificates of Deposit and ethical banking, as well as banking deposits Spencer Tierney is a consumer banker at NerdWallet. He has covered the personal financial sector since with a focus on certificates of deposit and other banking-related issues. He has had his work featured in The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among other publications. He is based in Berkeley, California.

Updated August 10, 2016.

The majority or all of the products we feature are provided by our partners, who pay us. This influences which products we write about as well as the place and way the product appears on the page. But, it doesn't affect our assessments. Our opinions are our own. Here's a list and .

Visit a convenience store like 7-Eleven or CVS Pharmacy and you're likely to see a few pre-paid debit cards hung on shelves.

They are also that are used to budget or as checking account substitutes are becoming more sought-after. Card purchases made by the largest prepaid issuers increased 15.7% in 2014 compared with the previous year as per The Nilson Report, which analyzes the data of the payment industry.

>> MORE:

Although they are popular, prepaid debit cards have some issues. The last year both experienced technical issues that led to cardholders being shut off their cards for up to one week. In that time, all funds on these cards, even income that was directly transferred to them, was inaccessible. Even in non-shocking events the prepaid debit cards come with many drawbacks.

Frequent fees

Prepaid debit cards usually charge you for features that you are used to with a checking account, such as free ATM usage, customer service as well as mobile and online services. Also, unlike checking accounts prepay cards typically don't have options to eliminate their monthly charges.

>> MORE:

Janice Elliot-Howardis an author from Atlanta was the first to get a prepaid card that cost her a small fee every time she bought something. After she realized how much it was costing her the card, she immediately canceled the card and purchased one which doesn't charge purchase transaction fees.

The woman isn't able to stay clear of the cost of all fees, but.

"The disadvantage is the ATM surcharge [for cash withdrawals], however, I do that very rarely," she says.

One of the benefits of prepaid debit cards is that they don't permit overdrafts, or charge fees for overdrafts. With a checking or savings account, you can get hit with an of around 30 or 35 cents for spending more than the amount you've got in your account. However, prepaid cards' frequent fees for transactions or ATM withdrawals may still add up.

Card details aren't always clear

Elizabeth Avery bought a prepaid debit card in a drugstore for an upcoming trip overseas but later realized that the card could not be used abroad.

"I find that the fine prints are where I'm seeing problems," says Avery, founder of travel website Solo Trekker 4 U and an investment banker for private equity in Washington, D.C. She was planning to use the card in ATMs across the world to get cash and had not found any mention on the packaging's exterior that it was intended to be used in the US.

It's not the only information that can be missing.

"The disclosures for prepaid credit cards sold at retail stores don't demand that all fees to be disclosed on the outside packaging," says Thaddeus King who works with the consumer banking program at the Pew Charitable Trusts in Washington, D.C.

Protections still lacking

Credit cards that are pre-paid, like debit and credit cards belong to payment networks like Visa or MasterCard. In the end, you can get protection against fraud on card purchases but they do not have the protections that you can get from a bank account.

"When it is about bill pay as well as ATM transactions, they cannot be done through either the Visa or MasterCard networks," King says.

Other payment providers offer similar exclusions. For those transactions, King says you need to trust the disclosures of your card, which may not include protections , unless they are specifically for purchases.

Prepaid debit cards also aren't obliged to carry insurance through the Federal Deposit Insurance Corp. Also known as the FDIC which is how customers are able to recover their funds should their bank or issuer is insolvent. While many issuers of prepaid cards offer coverage voluntarily however, their agreements with cardholders may say that the terms are subject to change at any time.

The checking accounts, however should have greater fraud coverage because of a that protects both electronic as well as ATM transactions. They also have to be insured through the FDIC.

A good thing for debit card holders with prepaid cards is possible. The Consumer Financial Protection Bureau plans to release its plans later this year, which would increase protection against fraud on the cards to be comparable to the protections for debit and checking accounts.

"Prepaid debit card users should have the same protections afforded debit card holders," says Christina Tetreault, staff attorney at Consumers Union in San Francisco.

Author bio Spencer Tierney is a writer and NerdWallet's authority on certificates of deposit. He has had his work highlighted by USA Today and the Los Angeles Times.

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Auto Refinance Calculator

your vehicle loan can lower your interest rates and help you save hundreds to even thousands in the course of your loan. This is particularly the case if you initially contracted with a dealership or your credit score improved since taking out your auto loan. Whatever the case, it's worth the effort to estimate savings and to compare .

Make use of this auto loan refinance calculator to find potential savings . Bankrate's auto-refinance calculator can help you estimate the amount you could save on monthly payments, interest or both. Simply enter the details for your present loan such as your monthly installment the balance remaining, as well as the remaining loan period. Consider how a new loan could potentially save you money. Once you know which term and rate is most suitable for you and your wallet, it is wise to apply for the best deal, which will ensure that you get a good deal. Check out current offers to see how you can compare automobile loan prices and rates, after you have determined what you want your new loan to appear like.

How does refinancing work and what is it? it works? Refinancing lets you to obtain a new loan. The new loan will hold lower rates and terms and will reduce your monthly expenses. Your existing loan can be substituted by one from a new lender however, it is always wise to estimate the potential savings when you remain with your current bank or lender. The option to refinance will not occur . If you extend the term of your loan you're more likely to be on your vehicle loan. To prevent this from happening avoid long repayment terms -- which can feel enticing when refinancing. It is also essential to consider that lenders do have a say when it comes to refinancing. Most banks and lenders look for a clean vehicle title, payment history, and the age and value of the car. When should you refinance an auto loan? Deciding to refinance your auto loan comes down to saving the interest cost and reducing your monthly installment or both. Think about these situations when deciding whether you'd like to refinance your current auto loan:

You received dealer financing. Dealers usually will add a few points to the loan as commission. If your initial loan was financed by the preferred lender of your dealer, there is a good possibility that you didn't get the most favorable rate. Credit scores have improved. A difference of just 30 points on your credit score could have a significant impact on the rate you pay. If your score has improved since the initial auto loan it is possible to save money by refinancing. You're trying to lower the cost of your loan. Refinancing to extend the loan time frame can . What is the best way to apply for auto refinance loan The process of is a lot like the procedure for applying for . Take these steps prior to signing off on a new refinanced auto loan. Determine if refinancing is the right choice for your financial situation. Compare your current monthly cost with potential savings by refinancing. Review your current loan. Learn about your current rate and how much you would potentially pay in interest. Find out the value of your car. Utilize tools such as Kelley Blue Book and Edmunds to determine the value of your car . Explore. Compare loan options from at least three lenders. Sign off on the new loan. Select a loan and walk away with an updated time frame and rate. Next steps The secret to finding the most suitable auto loan is the possibility of . Refinancing is a great way to adjust your current loan to meet your budget for the month. Take advantage of the calculator to determine what a new loan would look like both for your and your wallet and take a look .

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Ask an Nerd: How Can I Set-Up My Bank Accounts?

Advertiser disclosure You're our first priority. Each time. We believe that every person should be able to make sound financial decisions with confidence. And while our site doesn't include every business or financial product that is available in the marketplace, we're proud of the advice we provide, the information we provide as well as the tools we design are impartial, independent easy to use and cost-free. How do we earn money? Our partners compensate us. This could influence which products we write about (and where those products appear on our website) However, it in no way affects our advice or suggestions, which are grounded in thousands of hours of study. Our partners do not pay us to guarantee favorable ratings of their goods or services. .

Ask an expert: How Do I set up my Bank Accounts?

The right combination of bank accounts can help improve your financial management through the use of various perks.

by Spencer Tierney Senior Writer | Certificates of Deposit and ethical banking, as well as banking deposits Spencer Tierney is a consumer banking writer for NerdWallet. He has written about finances for individuals since the year 2013 with a focus on certificates of deposit and other banking-related topics. The work he has written for him was featured in The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among other publications. He is located in Berkeley, California.

Updated Dec 9, 2022

Written by Sara Clarke Assistant Assigning Editor | Banking Sara Clarke is a Banking editor at NerdWallet. She has worked as an editor as well as a project director in the newsrooms over the past two decades, most recently working for U.S. News & World Report. She was responsible for projects such as the U.S. News education rankings as well as the Best States rankings. Sara has been featured in SiriusXM Business Radio and iHeartMedia's WHO Newsradio and has been mentioned on The Salt Lake Tribune, The St. Paul (Minnesota) Pioneer Press and other outlets. Sara is located close to Washington, D.C.

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The first homes of a banking relationship are your checking and savings accounts. However, just like you arrange your home in a different way or move into a new home, the way you organize your bank accounts may require changes in time.

If this is you and still have accounts at the same bank as your parents, maybe enough has changed in your life to consider if a new bank is better suited to your needs.

Let's find the appropriate kind of bank and the best combo of accounts and tools for you.

Which accounts in the bank are best for me?

It's probably not necessary to think too hard on this one. Checking accounts are used for spendingmoney, while savings accounts are meant to be used for saving funds and earning interest.

However, you may require additional or special accounts, so make sure to ask:

Do I intend to share finances with someone? If yes, then you may need joint accounts.

Do I need to have to save money that isn't accessible? Certificates of deposit are a kind of savings account which can do exactly that, and will earn you a guarantee.

Do I want a higher savings rate or lower fees? Online banks provide and typically, with low fees and low opening minimums. The best rates are above 3 percent. These options might be supplemental to your primary account.

>> COMPARE:

Savings Cash Management CD Checking Money Market

Member FDIC

Savings and SoFi Checking

The APY is 4.00% SoFi members with direct deposit can get up to 4.00 per cent annual percentage yield (APY) on savings balances (including Vaults) and 1.20% APY on checking balances. There is no minimum amount of direct deposit that is required to be eligible for 4.00 percent APY on savings. Members without direct deposit will receive 1.20 percent APY on their total account balances in checking and savings (including vaults). Interest rates are variable and subject to change at any time. The rates listed were last updated on 03/17/2023. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet

Min. balance required for APY $0

Member FDIC

Marcus is a product of Goldman Sachs Online Savings Account

APY 3.75 percent 3.75% APY (annual percentage yield) with a minimum balance of $0 to earn the APY stated. Accounts must have an active balance in order to remain open. APY current as of 02/14/2023.

Min. balance to APY $0

Member FDIC

CIT Bank Platinum Savings

APY 4.75 percent

Min. balance required for APY $5,000

They combine the features and services that are that are similar to checking, savings and/or investment accounts in one package. Cash management accounts are typically provided by non-bank financial institutions.

They combine the services and features similar to checking, savings and investment accounts in one account. These accounts for managing cash are generally provided by non-bank financial institutions.

on the website of Wealthfront.

Cash Account at Wealthfront

APY 4.30%

Min. balance required for APY $1

on Betterment's website

Betterment Cash Reserve - Paid non-client promotion

APY 4.20 Percentage of annual percentage yield (variable) is as of 03/27/2023.

Min. balance required for APY $0

CDs (certificates of deposit) are a type of savings account that comes with a fixed rate and term typically, they have higher interest rates than regular savings accounts.

CDs (certificates of deposit) are a form of savings account with the option of a fixed rate and time, and usually have higher rates of interest than standard savings accounts.

Member FDIC

Marcus is a Goldman Sachs High-Yield 10-Month CD

APY 5.05 5 % 5.05% APY (annual percentage yield) as of 03/28/2023. Special Offer Expires 09/15/2023.

The term is 10 months

CIT Bank CDs with no Penalty

APY 4.80 percent

The term is 11 months

Checking accounts can be used to deposit cash on a daily basis and for withdrawals.

Checking accounts can be used to deposit cash on a daily basis and for withdrawals.

The deposits are FDIC Insured

Current Account

APY N/A

Monthly fee $0

Chime Checking Account

APR N/A

Monthly fee $0

Member FDIC

Axos Bank(r) Rewards Checking

APY 3.30% Your annual percentage yield can be as high as 3.30% based on the following combined rate-rewards: direct deposits (not including transfers between banks from another account) that total more than $1500 every month earn 0.40%. A direct deposit that is eligible for a qualifying amount is required to satisfy the remaining eligibility requirements for interest rates. Ten (10) transactions at the point of sale per month using Your Rewards Visa(r) debit card for ordinary purchases that have at least $3 for each transaction, or registering for Account Aggregation/Personal Finance Manager (PFM) will earn 0.30 percent. Maintaining an average daily balance of at least $2,500 per month in the Axos self-directed trading Invest Account will yield 1.00%; maintaining an average of at least $2,500 a month on an Axos Managed Portfolio Invest account earns 1.00 percent; and making a monthly payment to an open Axos Bank consumer loan (commercial or business loans excluded) through a transfers from Rewards checking account will earn a maximum of 0.60 percent.

Monthly fee of $0

The money market accounts have rates that are similar to savings accounts, and come with certain features for checking.

The money market accounts have rates similar to savings accounts and have certain checking features.

Member FDIC

The Discover Bank Money Market Account

APY 3.50%

Min. balance to APY $1

How many accounts in my bank should I have?

The quick answer is: It all depends.

The ideal number is "the minimum number of accounts required to achieve your goals and to support your family," says Derek Brainard who is the head of the national department for financial education at the nonprofit AccessLex Institute. "Two is the minimum, however a lot of people exceed this for the sake of organization."

Multiple deposit accounts might help you budget by effectively making use of an online version of , which traditionally involves putting cash in envelopes designated for specific bills or goals. Instead, you could have a savings account for each goal or a checking account for different types of expenses, which might be way more convenient as compared to ATM cash withdrawals and using envelopes.

But this setup may not be the best for all.

"Do your multiple accounts provide reassurance or give you anxiety?" says Saundra Davis the founder and executive director for Sage Financial Solutions, a San Francisco Bay Area-based non-profit. Davis owns eight accounts with banks. These include business and personal checking accounts, a savings account for periodic expenses and an emergency savings account (commonly known as an ).

"How we live our lives must be evident in how we manage our finances," she says.

What's the right type of bank to me?

It's also a matter of personal preference, however you might not have all your options when . Let's go over the various types of banking institutions.

Bank vs. credit union

Both have similar accounts, but banks are not for-profit companies while credit unions are not-for-profit cooperatives which require membership based on the location of their headquarters or other variables. Banks, especially the biggest ones, typically have more modern technologies for banking online. You may also have lower fees and better rate for loans and savings, on average, at the credit union.

Brick-and-mortar vs. online bank

A traditional or brick-and-mortar bank has a network of ATMs and branches, as well as in-person support to address urgent issues or to use specialty services, such as cashier's checks , or for the signing of legal documents with an official notary. While an online banking institution typically lacks locations and the accompanying services, it may offer much higher rates on savings accounts and fewer fees than a traditional bank.

A brokerage can offer banking

A brokerage firm or investment firm can handle banking as well as investing if you want that convenience. The firm's bank account equivalent is often one that is usually insured to cover money that is beyond the Federal deposit insurance limit of $250,000 per account. This insurance lets you receive funds back in the event that the bank fails.

Combining types

You may be able to have your money at more than one institution and, in actuality you could benefit from it. I have an old-fashioned bank similar to that of my parents, however I keep cash in there mostly to pay my credit card bills promptly. The year 2015 was the first time I created an account with a high yield that offered a sign-up bonus I later discovered that I liking the same bank's checking account to use its debit card, which has no foreign transaction fees.

I might switch to be completely web-based, but what if I require an in-person service I've not yet needed -- such as the cashing of a check in excess of the limit set by my online bank for mobile check deposits, or talking to the bank's lending representative at a branch when applying for a future loan? In keeping both banks, I get access to a variety of benefits and services.

What tools for banks should I use?

A lot of banks have options that can aid in the management of your accounts, such as alerts that aid in budgeting or detecting fraud. You can also make automatic transfers to transfer some of your monthly earnings from checking accounts to savings on a regular basis.

The primary benefit of automatic transfers is to automate your good decision to save frequently, according to Brainard. "The one drawback is that it reduces cash flow flexibility." Therefore, make sure that your account balance is enough to pay monthly bills , so you don't have to make back-and-forth transfers.

While automatic transfers have their place, I've realized that the peer-to-peer payments system Zelle has a use case that the other transfer applications Venmo and Cash App don't. Since Zelle is embedded in many banks' apps, including both of my banks, I joined in both accounts Zelle account (one for each bank) and have been able to send nearly instant transfers for free between the two accounts. This is better than waiting for the between one and three days I used to do to transfer funds.

As with similar apps like Venmo, though Zelle's biggest disadvantage is that you cannot cancel a transfer after it's been sent, even if you transfer funds to the incorrect person.

Transaction alerts are a different tool that can help you budget or spot fraud. they're delivered via email or texts. Some common alerts include deposits or withdrawals above an amount, balances that drop below a threshold, and upcoming payment reminders. I have alerts on transactions with my credit card for nearly every purchase just in case I find one I didn't make.

When should I reevaluate my banking configuration?

Dana Twight, certified financial planner and owner of the Seattle-based firm Twight Financial Education, recommends evaluating your banking setup every 2 to 3 years. When your income changes or your expenses change, it could be time to review your financial needs.

Other reasons to change accounts or banks may be:

Having a major life occasion. The wedding ceremony could lead to opening joint accounts, and adopting or having the birth of a child could mean the opening of new accounts. If you are looking to get a mortgage or start your own business could lead you to a new financial institution or credit union with cheaper loans than your current bank.

The bank is no longer satisfying your requirements. The bank could begin charging fees on your account, or customer service doesn't help you solve serious issues.

Do you want to help an institution based on your beliefs. Some banks and credit unions like banks, play crucial roles in their communities and advocate for social change.

"Banking with a Black-owned bank is essential to me, but they do not have the same backing and the infrastructure that a major bank has," Davis says. "I realize that I have to pay a monthly fee to keep my money there and I do it because it is important for me."

The author's bio: Spencer Tierney is a writer and NerdWallet's official authority on deposit certificates. The work of Spencer Tierney has been featured in USA Today and the Los Angeles Times.

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Varo Vs. Chime: Which Is the Best for You?

Advertiser disclosure You're our first priority. Everytime. We believe that every person should be able to make sound financial decisions without hesitation. While our website does not include every company or financial product that is available on the market, we're proud that the advice we provide and the information we offer and the tools we develop are objective, independent simple, and completely free. How do we make money? Our partners compensate us. This may influence which products we write about (and the way they appear on our website) however it in no way affects our suggestions or recommendations, which are grounded in many hours of study. Our partners are not able to promise us favorable ratings of their goods or services. .

Varo Vs. Chime: Which Is More Suitable for You?

Varo and Chime both offer high-interest on savings accounts, however their products and services have certain differences.

By Chanelle Bessette, Lead Writer/Spokesperson Banking, checking accounts, Cash Management Accounts Chanelle Bessette is a private financial writer at NerdWallet who writes about banking. She was previously employed at Fortune, Forbes and the Reno Gazette-Journal. She also serves as a spokesperson for the banking team. Her expertise has been featured throughout The New York Times, Vox and Apartment Therapy.

Updated May 6 2022

Edited by Sara Clarke Assistant Assigning Editor | Banking Sara Clarke is a Banking editor at NerdWallet. She has been editor and project manager in newsrooms for more than two years, including most recently working for U.S. News & World Report. She managed projects such as U.S. News's U.S. News education rankings and rankings for the Best States rankings. Sara has appeared in SiriusXM Business Radio and iHeartMedia's WHO Newsradio and has been quoted by The Salt Lake Tribune, The St. Paul (Minnesota) Pioneer Press and other media outlets. She is based near Washington, D.C.

The majority or all of the products featured here are from our partners who pay us. This impacts the types of products we review and the location and manner in which the product is displayed on a page. However, this does not affect our opinions. Our opinions are entirely our own. Here's a list and .

Varo and Chime offer similar services, with some key differences. Varo operates as a banking institution and Chime is a neobank -- an online-only financial service firm that works with a bank in order to offer account insurance.

This is how the two firms compare to one another.

Snapshot Comparison

Checking account

No monthly maintenance fee or minimum balance requirements to either Varo Chime or Varo. Chime.

Varo as well as Chime both have deposits direct that are made early (up to two days early).

The cash deposits offered with Varo and Chime could be pricey however money deposits made from Walgreens are free with Chime.

Savings account

With Varo, customers can earn as much as 5.00 percent annually on their balances that amount to $5,000 if certain conditions are met. Alternatively, customers can earn 3.00% APY without having to meet those conditions or for balances that exceed $5,000.

Chime offers a 2.00% APR in the High Yield Savings account.

ATMs, Overdrafts, and customer service

Chime's SpotMe(r) overdraft service lets customers to overdraft up to $200 without fee if they meet some conditions for their account.

Varo doesn't allow overdrafts, but it has a cash advance program.

Varo customers can access more than 55,000 cost-free Allpoint ATMs.

Chime customers can access more than 60,000 fee-free MoneyPass, Allpoint and Visa Plus Alliance ATMs.

Varo and Chime are both online only and do not have branches.

Varo as well as Chime both have high mobile app ratings.

Choose Varo if:

You're looking for a high rate of interest on savings and you can meet the criteria to reach that goal.

Choose Chime if

You're looking for a good savings rate and an overdraft option that is flexible.

Checking

The ratings of NerdWallet are formulated by our editorial team. The scoring formulas are based on many data points for each financial service and product.

at Varo Bank, Member FDIC

Varo Bank Account. This Varo Bank Account has no monthly charges or minimum balance requirements. Customers also have access to the Allpoint ATM network, which has more than 55,000 ATMs for free where customers can take cash withdrawals. However, depositing cash is more complicated; Varo customers need to visit a Green Dot retailer such as Walgreens or Safeway and could be charged a charge of up to $5.95. Customers can also receive their paychecks up to two days early with direct deposit.

NerdWallet's ratings are determined through our team of editors. The scoring formulas consider several data points associated with each financial product and service.

Chime Spending Account. Chime doesn't charge monthly fees or require a minimum amount in its spending account. Chime also has savings plans where users can round up your purchases up to the closest dollar and save the difference. In addition, Chime customers can make free withdrawals at over 60,000 ATMs across the country. Chime can also be found in the Green Dot network, so customers can cash-in at specific stores for a small fee, or at Walgreens for free.

Find out more details from Chime

Chime claims: "The retailer that receives your cash will be responsible for transferring the funds for deposit into your Chime checking Account. Cash deposit fees may apply when you use a different retailer in addition to Walgreens."

"Round Ups" automatically round up debit card transactions according to dollar amounts. Then, transfer the round up from your Chime Savings Account into your checking account."

"Early accessibility to funds from direct deposits is contingent on the time of receipt of the payment file from the person who is making the payment. The funds are generally made available the day that when the file for payment is submitted, that could be up to two days prior to the scheduled payment date."

"Out-of-network ATM withdrawal charges may be applicable, but not at MoneyPass ATMs in a 7-Eleven, or any Allpoint or Visa Plus Alliance ATM."

Savings

Varo Savings Account. The account starts at a minimum of 3.00% APY. However, they are able to earn 5.00 percent on up to $5,000 if they make at least $1,000 in direct deposit per month and maintain the positive balance of their check (Varo Bank Account) and savings balance at the close each month. Varo offers two savings plans: one lets customers withdraw a percentage of the direct deposits made to their checking account and transfer the money in savings. Another program allows customers to save upon making purchases. Varo will round up your purchase until it is within a dollar. Then, put the difference into your savings account.

Chime High Yield Savings. Chime's savings account for free has an 2.00% APY , as long as you have a balance of at least $0.01. Chime also has two automatic savings programs: a roundup program for purchases made with an account debit card for checking accounts and a program that saves 10 percent from direct transfers of $500 or more your checking account into the savings accounts. Be aware that a Chime Checking Account is necessary to qualify for a Savings Account.

Find out more details from Chime

Chime says: " The Annual Percentage Yield ("APY") for the Chime Savings Account is subject to change and could be changed at any time. The stated APY will be in effect from October 25, 2022. No minimum balance required. Must be able to keep $0.01 in savings to earn interest. "

"There's no cost for the Chime Savings Account. Cash withdrawal and Third-party fees might be applicable for Chime Accounts with Checking Accounts. You need an existing Chime Checking Account to open an account with Chime Savings. Chime Savings Account."

Experience in banking

Varo Chime and Varo Chime are online-only and therefore you're out of luck if you prefer in-person service. The good news is that Varo provides extended weekends and weeksdays support hours and options to reach customer support via email or Twitter, and Chime can be reached via chat, email and the phone 24 hours a day, and on Twitter.

Varo and Chime both have excellent scores for mobile apps on both the Google Play and App Store marketplaces.

Overdrafts

Varo. Varo doesn't let overdrafts happen when a customer attempts to perform a transaction which could result in a negative balance in their account, Varo will deny the transaction. If you're in need of breathing room between paychecks, you can use this Varo Advance program, which permits you to receive an advance that can be up to $100, with an amount of $5.

Chime. Chime doesn't charge overdraft fees. Instead, it offers an overdraft program called SpotMe(r) that allows customers can make overdrafts up to $200 as long as they make at least $200 in direct deposits every month.

Get more information from Chime

Chime says: "Chime is a financial technology company, not a bank. Banking services provided through The Bancorp Bank, N.A. as well as Stride Bank, N.A. Members of the FDIC."

"Chime SpotMe is an optional service that requires only a single $200 or more as qualifying direct deposits to Chime Checking Account. Chime Checking Account each month. The members who are eligible will be allowed to overdraw their accounts up to $20 for debit card purchases and cash withdrawals in the beginning however, they may later be allowed to withdraw more that can be $200 or more, based on the your Chime Account history, direct deposit frequency and spending habits and other risk-related factors. Your limit will be displayed in the Chime mobile app. You will receive notice of any modifications to your limit. Limits can change at any point, at Chime's discretion. While there aren't any overdraft charges, there could be third-party or out-of-network charges associated to ATM transactions. SpotMe does not cover non-debit-card transactions, which includes ACH transfers and Pay Anyone transfers or Chime Checkbook transactions. Please refer to the these Terms and Conditions."

About the writer: Chanelle Bessette is a personal finance writer for NerdWallet covering banking. She is a specialist in cash management and checking accounts.

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How to Recover From a Repossession of your Car in 5 Steps

(image: https://freestocks.org/fs/wp-content/uploads/2022/02/sunny_winter_day_in_the_park_2-1024x683.jpg)Advertiser disclosure You're our first priority. Every time. We believe that every person should be able to make financial decisions with confidence. And while our site doesn't feature every company or financial product on the market We're pleased of the guidance we offer as well as the advice we provide and the tools we develop are independent, objective, straightforward -- and completely free. How do we earn money? Our partners pay us. This could influence which products we write about (and the way they appear on our site) However, it doesn't affect our advice or suggestions that are based on hundreds of hours of study. Our partners do not promise us favorable ratings of their goods or services. .

How to Recover From the Repossession of a Car in just 5 Steps

Find out the reason your car was taken away, and determine if you are able to recover it and be aware of your rights.

Written by Claire Tsosie Assigning Editor | Credit cards, business software, payments Claire Tsosie is an assigning editor at NerdWallet. Her expertise includes research and strategy. She has edited articles on a range of subjects such as software for business, Medicare and home improvement. Prior to that, she worked as an author for credit cards at NerdWallet for over five years. Her work was featured by Forbes, USA Today and The Associated Press. She's given talks on both CardCon (2017 and 2018) and FinCon (2019).

And Lauren Schwahn Lead Writer | Personal finances and Lauren Schwahn Lead Writer credit Lauren Schwahn is a writer at NerdWallet who writes about budgeting, debt and money-saving strategies. She is a contributor to the "Millennial Money" column for The Associated Press. The work she has contributed to was highlighted on USA Today, MarketWatch and other publications. Lauren has a bachelor's degree in historical studies from her home at the University of California, Santa Cruz. Her home is at San Francisco.

Updated Nov . 28 2022

Edited by Sheri Gordon Assistant Assigning Editor Credit scoring, making savings and paying down the debt Sheri Gordon is an assistant assigning editor on the Core Personal Finance team at NerdWallet and has edited financial content for over 20 years. Prior to joining NerdWallet, Sheri was on the Metro and Business copy desks at The Los Angeles Times, where she worked on stories that earned the 1998 Pulitzer Prize for breaking news. Sheri has edited publications about culture, arts, food, education and activism. She has published books about health and water policies, and architecture. Sheri graduated with her Bachelor of Arts in History at the University of California, Los Angeles.

The majority or all of the products we feature are from our partners who compensate us. This affects the products we feature as well as the place and way the product is featured on a page. However, this doesn't affect our assessments. Our opinions are our own. Here is a list of and .

If your car is taken away, you may not know the reason for it -- or how you're going to be able to get back to work the following day. You can still recover by taking action to take the care of your transportation requirements and protect your credit from further harm.

These are the five actions you can follow to get back from repossession:

1. Ask why your car was repossession

If you've had the opportunity, you'll be aware of the reason your car was repossessed. In other instances, the reason isn't so clear. In certain states, not getting insurance in a loan or lease contract could count as a default, and your car could be repoised due to it. Call your lender before you jump to conclusions so you can clarify what you need to do to resolve the issue.

Back to top

2. Find out if it is possible to obtain your vehicle back

A lot of times banks or repossession business will allow you to take your vehicle back if you repay the loan in complete, as well as the costs associated with repossession and before the car is auctioned off. You can sometimes return the loan and work out an alternative payment plan as well. The repossession may not be removed from in these situations, but your new payments are likely to be recognized if you negotiate arrangements with your lender (but not in the event that you buy the vehicle back at auction).

Before getting your car back Think about these questions:

If you had your vehicle back, would you be able to afford insurance, maintenance and gas?

Not making the necessary repairs or causing an accident without insurance may result in a more challenging financial position. And without fuel, you wouldn't be able to travel from point A to point B. If you're unable to afford these expenses, redeeming your car may not be your most cost-effective alternative.

Are you able to get access to low-cost public transportation, or an autopool?

Traveling to work via bus or other means may be a better choice rather than re-establishing the loan or paying your balance and repossession expenses in total.

Do you plan to file for bankruptcy?

If you're in serious debt in your expenses and you're not able of getting things back on track You may be contemplating . Filing bankruptcy before the repo agency sells your car, and there's a good chance that you'll get to keep your car and work out the best way to catch up on payments. Ask your lawyer if this would be possible in light of the kind of bankruptcy you're filing.

>> MORE:

From top to bottom

3. Know your rights

Even if your vehicle is towed away, you are still protected by certain laws:

The lender or repo company can repossess the vehicle but not the things inside.

If you have left your laptop in the vehicle, for instance it is a violation of the lender isn't able to retain it or offer it for sale. In certain states banks or repo agency could be required to supply you with an inventory of the items in the car and tell you how to get the items. If this isn't the case it's possible to ask. This generally doesn't pertain to any accessories you have in your vehicle, like new rims or a souped-up audio system.

Your property should not be damaged by the process

If your car is locked in your garage, for example, repo agents can't tear down the garage door to get your car. If you believe that your rights have been infringed, you should contact the consumer lawyer.

>> MORE:

Return to the top

4. If the car has been sold Ask if you owe money

If a repo agency repossesses your car and then sells it for auction, you might think that you're not owed any cash for the vehicle. However, that's not always the situation.

Imagine a bank granted you a $10,000 car loan and you owe $9,000 for it after you failed to pay. If the car you repossessed was sold at auction for $700 and you owe the remaining $2,000 on the car, plus repossession expenses in certain cases. This is referred to as a deficiency balance.

Balances in deficiency are not uncommon, especially when your auto loan was to purchase a brand new vehicle. It is possible to lose around 10% of the new car's value just by driving it off the lot. Even so, the lender or repossession company has the responsibility to conduct the sale in a "commercially reasonable way." In the event that the repossession vehicle is offered at a lower price than its actual market value of the car, you could be able to dispute the high deficiency balance in court.

If you ignore this deficiency balance entirely it could be . The lender may also pursue you for this debt in the majority of cases, provided that you are in the .

The accounts in collections are kept last for seven years, which means when you've got the cash it's generally best to settle the balance so that you don't cause impact on your credit.

Readers also ask

What happens when you do a voluntary repossession?

In the event that you inform your lender that you are unable to pay your loan and plan to take the car back. The lender will sell the car, and you'll be provided with a report with the sale's details. Similar to repossessions that are involuntary, you have to pay the difference between the price that the vehicle was sold for and the amount you owe for the loan. The difference is known as the deficiency balance.

How long does the voluntary repossession remain on your credit report?

Voluntary repossessions, which are a form of loan default, will be visible on your credit reports for . This type of negative mark can affect your credit score- especially your automotive-specific credit scores, which determine the rate of interest you pay for the next vehicle loan.

What happens if you have your car repossessed?

After being seized, your vehicle will probably be sold at auction. If your car sells for less than you owe, you may be sued for the difference, known as a deficiency, plus any applicable fees.

Return to the top

5. Work on improving your credit

A for up to 7 years, meaning a significant aspect of getting your credit back in the future is waiting. You can also be proactive by making sure you pay all bills punctually and making efforts to pay off other debts. This way when your negative credit history disappears from the record your credit score will be significantly higher than before, and you'll be in a better position.

Back to top

Know how your credit is evaluated

Find your score free of charge and the variables that affect it, as well as insights into ways to keep building.

About the authors: Claire Tsosie is an assigning editor for NerdWallet. She has had her work featured in Forbes, USA Today and The Associated Press.

Lauren Schwahn covers consumer credit and debt at NerdWallet. The work she has done was featured on USA Today and The Associated Press.

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Credit Access and Disability The importance of scores in a Crisis

Advertiser disclosure You're our first priority. Each time. We believe that every person should be able to make sound financial decisions with confidence. And while our site doesn't feature every company or financial product available in the marketplace, we're proud that the guidance we offer and the information we offer as well as the tools we design are independent, objective simple, and free. So how do we make money? Our partners compensate us. This may influence which products we write about (and the way they appear on our website) However, it in no way affects our advice or suggestions that are based on many hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. .

Credit Access and Disability The importance of scores in a Financial Crisis

Credit score is a factor that can allow you to get lower-interest loans and credit cards to help you cover your bills in an emergency. Here's how you can get started.

Written by Caitlin Mims Content Management Specialist Credit score, credit cards Caitlin Mims is a management specialist on the credit cards team at NerdWallet. Prior to joining NerdWallet she worked as an editor at CreditCards.com and Bankrate. Caitlin wrote about personal finances for seven years. She has covered credit cards, financial scores and credit, as well as retirement plans and the financial struggles women confront. She is based in Denver, Colorado.

Updated August 15, 2022 at 7:33 PM PDT.

Written by Kenley Young, the Assigning Editor Credit score, credit cards Kenley Young oversees the daily credit card coverage for NerdWallet. Previously, he was a homepage editor and digital content producer for Fox Sports, and before that a front page editor at Yahoo. He has a wealth of experience in both digital and print media, with times as the chief of the copy desk, a wire editor and a metro editor of the McClatchy newspapers chain.

Many or all of the products featured here are from our partners who pay us. This impacts the types of products we write about as well as the place and way the product appears on the page. But, it doesn't influence our evaluations. Our opinions are our own. Here's a list of and .

A LOT LIKE THIS

From the time Erin Noon Kay was little her mother taught her to handle money. It's a great practice for any parent to do, but for Noon Kay, it was essential. She was born with cerebral palsy. In addition to general budgeting, she had to be able to navigate through the confusing government benefits system.

Noon Kay the person who started Claiming Disability, a company that helps people with disabilities through outreach activities and media representation explained that many people who are disabled don't manage their finances themselves. Instead their finances are taken care of by a nonprofit as well as their families, which means they can't acquire the necessary skills themselves.

"I don't think we're doing disabled people a service when we try to shelter them from the realities of their own lives," says Noon Kay 33. "Like the way my mother had protected me from all of these things that would have been a huge shock."

One area that is often overlooked in financial management is the credit. Having good credit ( at least 690) is being able to access options in an emergency -- if, say, it happens that you are fired or become unable to work.

But people who are disabled are less likely to work at full-time and earn less per hour than people without disabilities, says Tom Foley, executive director of the National Disability Institute, or NDI. He also speculates that the disability community is one of the largest groups, making emergencies harder to manage.

For some, entering credit is their only choice

The solution may not be easy as simply cutting back on expenses: If you have an impairment, there are some costs that are often seen as essentials are actually necessities.

Foley gave the example of someone's air conditioning going out in the middle of the summer. If you're disabled and you live in Georgia fixing it is not a luxury; it's likely to be essential for your survival. If you are a poor creditor (FICO scores of 629 or lower) the options for securing such coverage are limited.

"It's everything kind of conspiring to put someone in a really precarious economic situation that makes it more difficult to manage any debt," says Foley.

The 2017 NDI analysis of survey data from the Financial Industry Regulatory Authority, or FINRA It found that people with disabilities are much less likely to utilize credit card than general population and are much more likely to suffer from debt and to use "alternative credit services" such as pawnshops or payday loans. Payday loans are often accompanied by APRs that exceed 300%..

If you have bad credit, or no credit at all, there are that will be easier than paying off. For those with good credit, they have even better options, including low-interest loans and 0% intro APR credit cards.

>> MORE:

How to begin building credit

Building your credit can be a challenge if you're facing financial difficulties. But it's not impossible. It's all down to knowing how to manage any debt you acquire. In reality, Noon Kay credits her mother's financial knowledge with her credit score today.

Here's how you can begin:

Open an account which is reported to credit bureaus

The majority of credit scoring models don't keep track of rent or utility payments, but credit cards as well as loans are usually disclosed to . Getting a credit card is one of the most effective methods to ensure that the account you choose to use will aid your credit score There are other options for those with poor or thin credit. (More on that later.)

>> MORE:

Pay on time

If you have an account that is reported to the credit bureaus, be sure to make your payments on time because that's among the most important factors in your credit score. If you've got credit card it's not necessary to pay the whole balance. As long as you pay your minimum payment, you'll be able to secure your credit.

But remember: Merely paying the minimum amount . The interest rate on credit cards is likely to be much less than the interest rate of a payday loan however, the APR will still typically sit in the double digits.

If you're having difficulty paying your minimum monthly payment take the initiative to get in touch with your credit card company first. The issuer might have a offer to reduce the amount of your monthly payment and maintain your account in good standing.

>> MORE:

Credit cards can aid

If your credit is not perfect, you might have some trouble getting approved for many credit cards, which includes the majority of rewards cards. However, there are some options:

Secured credit cards

Contrary to other credit cards they require a cash advance upfront. After you've closed the account with good standing -- or are able to upgrade it to a traditional credit card that is secured by responsible usage over time -- you'll be able to get the money back. Major issuers like Capital One and Discover offer secured credit cards.

Since the deposit decreases the card issuers' risk this makes it easier for those with poor or no credit to be accepted. It's actually possible to find secured credit cards that , or even a bank account -- although these products could have additional drawbacks, like annual fees or no upgrade path to higher-tier cards.

'Alternative' credit cards

Based on your credit score You may be eligible for an unsecured that can use non-traditional underwriting criteria to make approval decisions. The cards will still look at your credit history and credit score, but they'll also look at other factors such as your income, job and bank information.

It's not the ideal solution for all. If you're on a you may face some difficulties being approved. But it's an option to consider in the event that your credit history is less than the other financial histories of your.

Become an authorized user

You may also earn credit by joining the credit card of someone else. It is best to inquire with someone who has excellent financial practices and makes every payment on time, because you're building credit by piggybacking on their account.

As an authorized user you'll be able to get your own physical card and purchase using it, though it's not required; your credit could see a benefit without you ever needing to utilize the card.

But authorized users typically don't have the ability to make changes to the account, nor are they responsible for the payment made on the account. That liability falls to the account's owner, meaning it's wise for you two to set rules and expectations in advance. If you accrue charges that the primary account holder can't pay either of you will have negative consequences to your credit.

About the author: Caitlin Mims is a content management specialist at NerdWallet covering credit cards. Prior to that, she was an editor for CreditCards.com.

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Find the right credit card for you. If you're looking to lower your interest rate or earn more rewards, the right card is out there. Just answer a few questions and we'll narrow your search for you.

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Five Things You Should Know About the Varo Credit Card

Advertiser disclosure You're our first priority. Each time. We believe everyone should be able make financial decisions without hesitation. And while our site doesn't feature every company or financial product on the market however, we're confident that the advice we provide and the information we offer as well as the tools we design are objective, independent easy to use and free. So how do we earn money? Our partners pay us. This can influence the products we review and write about (and the places they are featured on the site), but it does not affect our advice or suggestions, which are grounded in many hours of study. Our partners do not be paid to ensure positive reviews of their products or services. .

Five Things to Know About Varo Credit Card Varo Credit Card

It encourages responsible credit use and also keeps the penalties light should you make a mistake up -- which with this card is very difficult to do.

By Jae Bratton Lead Writer Credit card Jae Bratton writes for the credit cards team at NerdWallet. She earned a bachelor's in English from Wake Forest University and a master's in English from the University of North Carolina at Greensboro. Before writing for NerdWallet, Jae spent 13 years teaching English and journalism. Her writing has appeared in blogs, newspapers as well as an academic publication. Jae is from North Carolina.

Updated Feb 10, 2023, 10:19 AM PST

Written by Kenley Young Assigning Editor Credit score, credit cards Kenley Young oversees the daily coverage of credit cards for NerdWallet. Previously, he was an editor on the homepage as well as a digital content producer for Fox Sports, and before that , a front page editor for Yahoo. He has a wealth of experience in both digital and print media, with periods as the chief of the copy desk as well as a wire editor as well as a metro editor at The McClatchy Newspaper chain.

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A LOT LIKE THIS

The Varo Believe Secured Credit Card, issued by the online bank Varo has many similarities with other cards intended for consumers who want to build or rebuild their credit. Its closest relative may be the . It's a similar card that is also targeted at people who are new to the field and newcomers Varo credit card does not offer an annual percent rate or APR; features no annual fee or minimum security deposit, and does not conduct an invasive credit screening when you apply. Those features can save you money as well as keep you from losing points from your credit score, which often occurs following the application process has been completed .

The Varo Believe Secured Credit Card is designed to ward off excessive spending and late or missed payments. It's also capable of earning rewards. However, the safeguards included in the card might seem a bit restrictive or even a little overbearing to some.

There are 5 things to be aware of about the Varo credit card.

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1. You'll need a Varo bank account to get the Varo credit card

There's no cost to set up an account with a Varo bank account, but there's still a hoops you have to leap through. And while there's also no security deposit needed to be used for this Varo credit card, you're only eligible to be approved when you have a Varo account has been able to receive direct deposits of at least $500 within the past 90 days. Deposits from an employer or from the government count, but transfers made through peer-to-peer apps such as Venmo don't.

If the Varo bank account meets these requirements, you'll get invited to submit an application for Varo Believe Secured Credit Card within the Varo Bank app.

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2. You set your own credit limit up to a certain amount

To make use of the Varo Believe Secured Credit Card, you'll have to transfer money out of the Varo bank account to your Varo Believe secured account, which is only possible in using the Varo app. The balance in the account that's secured becomes the credit limit.

However, unlike a conventional credit card one, this Varo credit card comes with spending caps. You'll be restricted to $2500 per day for purchases, and $1,000 per month for cash advances, and the sum of cash advances and purchases can't exceed $10,000 per billing cycle.

A major purchase, such as new furniture, could cause you to go over your spending limit and would require you to find a different payment method if you needed to purchase something else on this day.

3. Credit card transactions are virtually impossible to falsify.

The balance of the Varo Believe secured account is your credit limit, but it also serves as a source of funding for credit card transactions. To ensure you'll have enough cash to cover your monthly bills in total, Varo automatically deducts the amount of any credit card transactions from the remaining balance in the account secured. It's therefore impossible to go overboard with your Varo credit card. Varo also blocks your card if you miss the payment, and they won't allow access until the entire balance is paid off.

To ensure prompt payment, Varo offers a "SafePay" option. With SafePay disabled, the balances will be instantly paid in full by the conclusion of each billing cycle.

The Varo credit card provides information to the three main U.S. credit bureaus. Therefore, these procedures will definitely benefit cardholders who are building or fixing credit histories because they incentivize paying off the balance on their credit card, and . However, such hand-holding is not typically available on traditional credit cards that are unsecured. If and when you change from Varo Believe Secured Credit Card to a standard credit card, be aware that you'll probably need to be more mindful regarding paying your monthly statements. (The secured card offers the only card Varo offers, which means there's no upgrade option within the portfolio.)

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4. The APR is 0%.

Even if you miss an installment on your credit card the balance won't grow due to interest because the APR on this Varo Believe Secured Credit Card is zero percent. That's an incredibly rare, potential savings perk, and is one of the benefits that this credit card offers.

It's just not the way traditional credit cards operate. If you're looking to make an upgrade from your Varo credit card be sure you know your new card's APR.

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5. Cash back is available on select purchases

Varo Believe Secured Credit Card Varo Believe Secured Credit Card offers cash back in two different ways such as offer on the internet and cards linked offers. The online deals offered by Varo -- akin to those offered by a traditional credit card give cash back on purchases made at stores that you've accessed through the Varo application or via a promotional email from Varo.

Or you could use a card-linked offer for cash-back, which works like coupons. Offers linked to cards require activation first, and the purchase must be made with your Varo credit card to be eligible to receive the discounted.

Cash back is deposited automatically to the Varo bank account once you've earned more than $5. Cash-back earning with Varo Believe Credit Card Varo Believe Credit Card are limited to $50 per month. In contrast, other credit cards with secured features offer unlimited cash back , and typically don't require that you browse through a particular portal or sign up for individual offers.

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Card art by Varo. Varo.

Chime Credit Builder Visa(r) Chime Credit Builder Visa(r) Credit Card is issued by Stride Bank, N.A., Member FDIC, pursuant to the license of Visa U.S.A. Inc. and may be used everywhere Visa credit cards can be used.

About the writer: Jae Bratton is a writer for the credit card group at NerdWallet. Her writing has been published in various blogs, newspapers and an academic journal.

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