What Is A Secured Credit Card? (What You Need To Know)

By Minh Tong Reviewed by Nima Vahdat Updated Nov 01, 2023
What Is A Secured Credit Card? (What You Need To Know)

If you’re in search of a new card and have a limited or poor credit history, you might have encountered secured credit cards.

Getting approved for an unsecured credit card can pose significant challenges when your credit score is less than stellar. Moreover, improving your credit over time may prove elusive if you can’t secure a lender willing to extend a revolving credit line to you.

Enter secured credit cards! 

These are specifically designed for individuals aiming to establish or rebuild their credit. This includes those with poor credit or individuals who have no credit history. In fact, they are a great financial tool if you are considering debt relief to help manage your debt. 


  • Secured Credit Cards –  They require a security deposit, making them accessible for individuals with limited or damaged credit histories.
  • Rebuilding Your Credit Score – Secured credit cards serve as a means to rebuild your credit by demonstrating responsible financial behavior.
  • Qualifying for an Unsecured Card – With responsible use, you can eventually transition to an unsecured credit card, further improving your credit standing.

What’s a Secured Credit Card?

Simply put, this is a financial tool designed to help people build/rebuild their credit. 

In contrast to debit or prepaid cards, a secured card functions as an actual credit card. Consequently, the issuer of a secured card may report your credit activity, such as your monthly payment history, to major credit bureaus like Equifax, Experian, and TransUnion. 

Consistently making on-time payments through a secured card can assist you in building a positive credit history, enhancing your overall credit profile, and potentially qualifying for an unsecured card without a deposit.

Unlike traditional unsecured credit cards, secured cards require the cardholder to provide a security deposit, typically equal to the card’s credit limit. 

The deposit is typically $200-$400, but it may be lower or higher depending on the secured card you go for. This deposit acts as collateral, reducing the risk for the card issuer and making secured cards accessible to a broader range of consumers.

A Useful Tool For Rebuilding Your Credit

Secured credit cards offer a structured path to credit improvement, provided that the card issuer reports your activity to the credit bureaus.

By consistently using the card responsibly, you can demonstrate your creditworthiness to potential lenders and credit bureaus.

Credit cards furnish credit bureaus with essential information regarding your credit usage and repayment habits. 

Ensuring you pay your card on time and at least the minimum payment each month demonstrates your financial responsibility. These factors carry significant weight in influencing your credit scores.

Furthermore, having an open line of credit can positively impact your score by altering your credit utilization ratio. Expanding your total available credit while maintaining consistent spending patterns can help reduce your credit utilization ratio. 

Ideally, strive to keep your credit utilization ratio below 30 percent. Paying off your card entirely each month is an effective way to achieve this.

Applying for A Secured Credit Card

To apply for a secured credit card, follow these simple steps…

Approval Process: Start by checking your eligibility for the card. Approval isn’t guaranteed, as it depends on each issuer’s policies and qualifications, apart from the security deposit requirement. 

Consider factors like the card’s annual percentage rate (APR) and potential hidden fees.

Deposit Requirement: Deposits can vary, and some issuers allow you to fund your deposit over time, while others may require an upfront deposit. 

The deposit amount can also differ; it may match your credit line, or, in some cases, your credit limit could be higher than the deposit amount.

Card Usage: After approval and making your deposit, you can use the secured card for both in-person and online purchases, just like an unsecured card. 

Secured cards often resemble regular credit cards. To build credit, make sure to use your card responsibly by making on-time payments each month.

Who Should Consider a Secured Card?

Secured credit cards are a brilliant choice for several scenarios, including the following…

Limited Credit History: If you have a short or limited credit history or no credit at all, securing a credit card can be challenging. Secured cards provide an entry point to the world of credit.

Credit Rebuilding: Individuals with damaged credit due to past financial missteps can use secured cards as a stepping stone toward credit recovery.

Steady Income: You’ll need a stable source of income to qualify for a secured card. Lenders want assurance that you can meet your financial obligations.

How a Secured Card Works

Secured credit cards function similarly to traditional credit cards, with a few key distinctions.

Security Deposit: You’ll be required to make a security deposit, which characteristically becomes your credit limit. 

For instance, a $500 deposit equates to a $500 credit limit. To increase your spending capacity, you’ll be required to deposit a higher sum of money. The maximum deposit amount differs depending on the specific secured card, but it can potentially reach up to $2,500.

Card Usage: Use your secured card for everyday expenses, just like any other credit card. This usage is reported to credit bureaus, impacting your credit history.

Timely Payments: Make your credit card bill payments on time and in full each month. Timely payments are key to building a positive credit history.

Interest Charges: Like traditional credit cards, secured cards may have an Annual Percentage Rate (APR) if you carry a balance. However, it’s advisable to pay your balance in full to avoid interest charges.

Using Your Secured Card Responsibly

To maximize the advantages of a secured credit card, consider these responsible practices…

Pay on Time: Timely payments are a cornerstone of credit building. Set up automatic payments to ensure you never miss a due date.

Keep Balances Low: Aim to use no more than 30% of your credit limit. A high credit utilization ratio can negatively impact your credit score.

Monitor Your Credit: Frequently review your credit reports for accuracy and any signs of improvement.

How to Qualify for an Unsecured Credit Card

Secured credit cards are often viewed as a stepping stone to unsecured credit cards. 

Unsecured debt is debt with no collateral pledged to the creditor. In certain loans, such as mortgages and auto loans, the lender has the right to seize the property if you (the borrower) fail to make payments. 

In contrast, unsecured debt, like credit card balances or medical bills, is not tied to any specific property. This means that creditors face a higher risk of losing their investments if the borrower is no longer able to repay the debt.

With responsible card usage and improved credit, you can increase your eligibility for an unsecured card over time. 

The transition typically occurs when:

  • Your credit score improves significantly.
  • You establish a consistent payment history.
  • You demonstrate responsible credit utilization.

Can I Get My Security Deposit Back?

Most card issuers typically return your security deposit only upon closing your account. Full deposit refunds are usually contingent on having a fully paid-off account. 

In case of account default, the credit card company might utilize your security deposit to settle the outstanding balance.

Nonetheless, a select few issuers offer programs that enable you to transition from a secured card to an unsecured one, thereby refunding your initial security deposit. 

This transition typically occurs after demonstrating a consistent track record of on-time, full bill payments over a certain period.

Conclusion: A Secured Credit Card Can Provide A Solution To Rebuilding Your Credit

A secured credit card serves as a valuable tool for individuals looking to establish or rebuild their credit. 

By responsibly managing your secured card, you can pave the way for future financial opportunities and increased creditworthiness.

At Americor, we understand the importance of managing your finances wisely. 

As America’s trusted source for debt relief solutions, we aim to empower you with financial knowledge that can lead to informed decisions, whether it’s about savings, investments, or managing debt.

If high-interest debts are impacting your savings, investments, and financial well-being, explore our debt relief solutions, including debt settlement and debt consolidation, to regain control of your financial future.

If your debt has become unmanageable and you have difficulty making your debt payments each month, then you should consider a free consultation call with one of our certified Debt Consultants, who can provide personalized advice tailored to your specific needs.

By taking proactive steps today, you can put an end to your financial stress and work towards a brighter financial future. 

Remember, there is always hope for debt relief, and our team of experienced professionals are ready to guide you on your journey to regaining control of your finances.

For more information on Americor’s debt relief services, contact us today to see how we can help you eliminate your debts, and get on the fast-track to becoming completely debt-free!


Minh Tong

Minh leverages decades of experience in marketing, sales management and technology to provide high-level advice and lead new initiatives. Minh has a Bachelor of Science in Business/Managerial Economics from University of California at Irvine. He brings over 20 years of sales and executive management experience to the company and his responsibilities include customer service improvement, professional development, and carrying out communications and marketing. Originally from the east coast, Minh resides in southern California and enjoys spending time with his family, going to the beach, and playing a variety of sports.