Green Dot Bank, one of the largest prepaid debit card issuers, is entering the credit card business, expanding the options available to those looking for credit cards for bad credit.

the Green Dot Visa® secured credit card is a secured credit card, which means cardholders must deposit a refundable security deposit. Because the deposit reduces the risk for the lender, secured cards are available to many people who might not qualify for a regular credit card, including those with a thin credit history or bad credit.

Most major issuers offer secure cards, although they do not promote them very widely.

“At Green Dot, we think this is a great opportunity,” says Lewis Goodwin, President of Green Dot Bank. “Secure cards are kind of a sleepy product, and the right company hasn’t gone out and marketed it to consumers who really need them. This is the segment we are already serving with our prepaid cards.

The main difference between a secured credit card and a prepaid debit card: With a prepaid card, the money you deposit on the card is used to pay for your purchases; with a secure card, your security deposit is only there as a guarantee, in case you don’t pay your bill. You are responsible for paying for your purchases each month. This is why a secured card can help you increase your credit, unlike a prepaid card.

So what the Green Dot Visa® secured credit card to offer? Let’s see the basics:

• Minimum deposit of $ 200, maximum deposit of $ 5,000. The line of credit is equal to the deposit.

• Reports to the three credit bureaus.

• No penalty for the first missed payment, then up to $ 27.

• No penalty for the first returned check, then up to $ 27.

• 3% foreign transaction fees.

The APR is lower than that of many secure cards, but Green Dot Visa® secured credit card charges an annual fee. Several cards from major issuers – the Discover it® secure credit card and the Capital One Secure Mastercard® – have no annual fees, although their APRs are 3 to 5% higher. On any credit card, you can avoid paying interest by paying off your balance in full each month.

Goodwin says the card offers a free pass on a missed payment and returned check, as Green Dot recognizes that many cardholders will be new to credit processing. “This is an educational process,” he says. “We don’t want to punish someone for learning. We need to be able to help them understand that these actions can help or hurt your credit. “

To apply to Green Dot Visa® secured credit card, you fill out a profile on the Green Dot site, noting your professional situation, your monthly income and your monthly housing expenses. Green Dot decides if you are eligible for the card and determines the maximum credit line you are entitled to. They will then mail your card to you, but you cannot use it until you activate it by making your security deposit.

You can choose how much to deposit – from a minimum of $ 200 up to your maximum approved credit limit. Anything you deposit will become your limit on the card. So, for example, Green Dot could approve you for a maximum of $ 5,000, but you could choose to deposit only $ 500, and that would be your credit limit.

Activation is similar to using a prepaid card. There are two ways to make your deposit:

• Send a check or money order to Green Dot, which takes about 10 days to process. There is no charge for activation this way.

• Bring the card to a Green Dot partner store – Wal-Mart, Walgreens, CVS, RiteAid, or 7-Eleven. In the store, you go to the cashier with your card and the deposit in cash. The cashier swipes the card and enters the deposit amount. This method requires a processing fee of $ 4.95.

Currently, you cannot deposit by wire transfer from a bank account. Green Dot’s vice president of communications Michelle Blaya said the bank is exploring other ways to pay the security deposit. She points out that the activation process reflects what Green Dot prepaid customers are used to.

“A lot of people in this segment have been used to putting money on a card and making transactions,” says Goodwin. “Now we’re re-educating them to use a credit card, and that will help them build credit. “

Green Dot offers online management and bill payment features so that cardholders can track their purchases and stay on top of payments. Many unbanked and underbanked consumers – those without access or limited access to traditional financial services – may not have computers, but many do have smartphones. According to the 2015 Federal Reserve report, 65% of unbanked people and 73% of underbanked people have access to smartphones.

When using a secured card to create credit, practice good habits: charge a few small purchases each month, avoid maxing out the card, and most importantly, pay your balance in full and on time each month. With time and responsible use, you can increase your credit score, which not only qualifies you for an unsecured card, but also saves you money in the form of more options. and lower interest rates.