Pesto Credit Card: Flexible Security Deposit, With a Big Risk

You can use valuables, instead of cash, to secure a credit line

For traditional secured cards, a cash security deposit — often $200 to $300 — is necessary to open the credit account. That deposit is eventually refundable, but forking over that much cash upfront, or even just tying it up for a period of time, can be prohibitive for some people.

As an asset-secured card, the Pesto Secured Rewards Mastercard® lets you use a physical item (instead of cash) as collateral for your credit line, a benefit for those with limited liquidity. Cardholders can submit multiple items as collateral in order to get a higher credit limit. The minimum total value of all assets must be $500, while the maximum credit limit on the card is $25,000.

Pesto accepts the following items as collateral:

• Fine jewelry.

• Diamonds.

• Gemstones. 

• Luxury watches.

• Precious metals.

If you secure your credit line with a physical item, you’ll have to send it to Pesto, where its value will be assessed by experts certified by the Gemological Institute of America. Items may be dropped off at one of Pesto’s partner locations or mailed to Pesto using a prepaid UPS shipping label. Valuables are insured during shipping and while they’re held in temperature-controlled storage. Return delivery is also free for cardholders whose accounts are closed with no outstanding balances.

Cash deposits are also accepted

Those who have a cash reserve but not a collateral item — or who can’t bear to part with their valuables — can submit a cash security deposit instead. The credit line will be equal to the security deposit amount. Pesto requires a $200 security deposit and caps credit limits secured by cash at $2,000.

If you want to put up cash for the Pesto Secured Rewards Mastercard® but don’t have the full $200 on hand, you can pay a one-time $20 fee, which allows you to pay the deposit over time in installments as low as $20. Cardholders who choose this option must pay off the security deposit within a year; however, they aren’t required to submit deposits on a particular schedule.

The ability to fund a deposit over time is a rare feature among secured cards, but not unheard of. The secured Self Visa® Credit Card, for example, also lets cardholders fund their security deposit in increments, but the payments must be made by a certain date every month. The Capital One Platinum Secured Credit Card allows you to pay your deposit in installments of at least $20, though you must fully fund it within 35 days of approval. 

» LEARN: How to save up for a secured credit card deposit

Upgrade path

Cardholders who make six consecutive on-time payments are automatically considered for a partially secured or fully unsecured Pesto card. Qualifying cardholders don’t have to apply for another card and simply keep their original Pesto card.

A partially secured card means that the cardholder has received a credit limit greater than the collateral asset’s value, but Pesto retains the item to secure part of the credit line. If the cardholder graduates directly to a fully unsecured Pesto card, Pesto will return the collateral item.

Factors that determine whether a cardholder upgrades to a partially secured or unsecured card include credit scores and utilization ratio.

Rewards

While the primary function of a secured card is to build credit, the ability to earn rewards is a nice perk. The Pesto card earns an unlimited 1% cash back on purchases and, oddly, cash advances — though you'll likely want to avoid the latter if at all possible.

Possible loss of the collateral item

One of the main perks of the Pesto Secured Rewards Mastercard® can, ironically, also be its biggest drawback: If your Pesto account is in default for more than 90 days, you could lose the item that’s securing the account. Be wary, then, of submitting for collateral something irreplaceable like a family heirloom. It can be tempting to put up something really valuable to get a big credit limit, but know that Pesto reserves the right to sell the item in order to recoup its losses should you fail to make credit card payments.

Annual fee

The Pesto Mastercard has a $39.96 annual fee, which cardholders will pay in monthly installments of $3.33. That amount doesn’t seem huge, but other cards for people with poor or no credit don’t have an annual fee.

» MORE: Annual fees? Several new credit cards are opting for monthly ones

Limited credit reporting

As of this writing, the Pesto Secured Rewards Mastercard® reports payments to only one of the three major U.S. credit bureaus, TransUnion. Ideally, a credit card will report to all three bureaus, including Experian and Equifax, because different lenders might pull reports from different bureaus when they're determining your creditworthiness for future loans.

The company says it is working on adding Experian and Equifax.

» MORE: The 3 credit bureaus, and why they matter to you

High interest rate

The ongoing APR is 29.99% Variable on the Pesto Secured Rewards Mastercard®. That’s the rate you’ll pay on any balances from credit card purchases that aren’t paid off by the due date.

Yes, that rate is lower than what you’d find in most payday, pawnshop or car title loans, but it’s still higher than average among credit cards that assess interest.