How Does a Self Credit Card Work?

Self Credit Cards are like debit cards, and function in a similar way.  A self credit card is a card that allows people with no credit or poor credit to build a credit profile.

Basically, a self credit card is where you pay ahead of time, the amount you want to borrow.  From yourself.  But through a credit agency.  The whole point of that is to get you on the credit scoring agencies.  Say for example, that you have zero credit.  Obtaining a self credit card (they start as low as $300), you basically buy the card for $300, and use the money, paying it back, even though it’s your own money.  In essence, you’ve created a bank of yourself, which will update the credit agencies and begin building your credit.

Start with a Self Credit-Builder Account

Before you apply for the self credit card, you have to open a self credit-builder account. A credit-builder account helps in building credit.

This is not like personal loans, which offer money in a huge sum that must be paid back over time. Credit builder loans hold your funds in an account while you make payments. It proves that you can pay back what you have borrowed and also build your credit score. 

This is how a self credit-builder account works:

Apply for a Self Credit Builder Account

A credit check is not required to open a credit-builder account. Non-refundable administrative fees should be paid once. When approved, the bank will issue a small loan and hold it in a secured CD.

Make payments

You should make payments for 1 to 2 years. You set your monthly repayment commitment when you apply. Check exactly how much you will pay fees and interest, along with the full amount at the end of loan periods. Make your required monthly payments until your loan is completed.

Build credit history

By using a self credit card, you build your credit history and add it to savings. National credit bureaus keep an eye on your loan payments. Payment history increases your credit score. If your payments are complete, you’ll be building a good credit score. You’ll be growing your account balance simultaneously, reducing the fees and interest.

By the end, you’ll get the full loan amount.

Qualification for Self Credit Card

Qualifying for a self-credit card is quite easy. You should meet the following criteria:

  • You should have made at least your last three monthly credit builder loan payments in full and on-time.
  • You should have saved a minimum amount or more in your credit-builder account.
  • You should have no outstanding fees.

Build Credit While Earning Interest on Savings

After the credit builder account is created, the bank provides a small loan. Credit agencies target the repayments of your loans. It helps to build credit factors like a credit score. 

If you have opened a self-credit card account, it will hold onto your funds as a security deposit. You’ll receive your security deposit back when your credit card is closed (minus any outstanding charges).

Fees and Charges

There are fees and charges for the self-credit card. There are no interest charges on credit-builder loans. These expenses make the card too expensive. It is because you choose a longer repayment term, which means you pay more interest charges.

What is this Good for?

It is a great card for the person who would like a credit card that can double as an enforced savings plan. Once your payment is done after one or two years, the card balance and remaining fees are removed. You will receive interest earned from the security deposit in the account, and if you have maintained your payments, you will have begun to build a credit score and credit.

This is a card for those who will pay and build their credit record.

The banks evaluate interest charges depending upon your repayment plan and rates. It is higher from the minimal or poor credit. There is no annual fee for this card. A one-time administrative charge is applicable for a self credit-builder account.

Security Features

Self-credit card offers standard safety and security measures. There is multi-level encryption and regular vulnerability scans to keep data secure.

The Credit Builder loan is secured by Federal Deposit Insurance Corporation (FDIC) insured certificate of deposit.

Is a Self Credit Card the Right thing?

Self-credit card lowers some of the traditional barriers to credit card approval. There is a lack of credit checks, and it is cost-effective too. The charges you’ll pay on the credit builder account loan depend on the amount you’ve borrowed.

By putting a loan and card together it would cost more than an upfront security deposit. You’ll not be able to access your funds, or your cards immediately.

You could pay off your credit-builder account loan early. It may affect how much payment history you’re able to establish with the credit bureaus.

It’s better to make those trade-offs first.

Self Credit-builder Loan

If you want to build your credit and can’t qualify for a traditional loan, then a self credit-builder loan is the best one.

You’ll be paying a non-refundable administrative fee. You’ll not be able to access your loan funds until your account is paid, but interest should be paid.

There is no upfront payment to get a self credit-builder loan. But, you’ll choose payment plans that work the best for you to make monthly payments.

If you want to build a good credit score then a self credit-builder loan is a good option. By building a good credit history, it helps you to achieve future financial goals.

But there are some things to be remembered in self credit-builder loans.

  • The consumer credit bureaus view on your payments. If you miss your monthly payments, the loan may hurt your credit in the long run.
  • Make sure you choose a monthly payment amount that is affordable for you financially.
  • A credit-builder loan won’t be suitable if you’re looking to save money. It is because you’ll pay interest on your loan amount. However, you’ll be building credit, and this is not dissimilar to saving money, in the long term.

Key Takeaway

If you want to build or rebuild your credit, then a self credit card is a great option. It offers a low entry barrier and a chance to build your security deposit over time.


Go for a straightforward payment plan in a self credit-builder account. You can choose a monthly commitment that works for you and start saving for your deposits. If you’re eligible, you can get the card without any credit check. Then set your own credit limit and work accordingly.

Credit cards generally offer some intro bonuses and sign-up bonuses. But self credit cards and credit-builder accounts have become an exception.

Frequently Asked Questions

  1. What’s the maximum self-credit card limit?

As of January 2021, the maximum secured credit limit is $3,000 for eligible customers.

  1. What’s the minimum self-credit card limit?

The minimum credit limit is $100.

Infographic on Self Credit Card



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