The short answer? A secured credit card requires you provide a refundable security deposit when you open the account. The deposit usually matches the credit limit. For example, a $500 deposit results in a $500 credit limit.
The secured card works like a non-secured credit card, making purchases and bill payments more convenient than cash or checks. When you use a secured card, it looks and functions the same way “regular” credit cards do.
Over time, you can use secured credit cards for building credit through regular on-time payments.
Making purchases and payments on a secured credit card works the same way as using an unsecured credit card. In fact, secured Visa cards are accepted everywhere Visa cards are accepted — which is at over 150 million Visa merchant locations across the globe.
The main difference is how the card is issued.
- Deposit or collateral
Unsecured credit cards allow borrowing money from the banks without a deposit, but secured credit cards use a deposit as the credit limit. This lowers risk for issuers. - Credit check
While unsecured cards can require strong credit, secured cards are more accessible to first-time or limited-credit applicants. - Purpose
Many Americans use secured cards to build credit, or to rebuild credit. Unsecured cards are often used by people who’ve established a pattern of paying their cards reliably over time. - Eligibility
Secured cards are widely available to beginners, students or new credit users. Unsecured cards are typically offered to applicants with stronger credit or income history.
Differences
| Security deposit | Secured credit cards require a security deposit. Unsecured cards don’t. |
|---|---|
| Eligibility | Secured cards can be offered to beginners too. Unsecured credit cards may require a strong credit history and stable income. |
| Credit limit | Credit limit for secured credit cards often ranges between $200-$500. Unsecured credit cards may have much higher credit limits, depending on eligibility. |
Similarities
| Acceptance | Both secured and unsecured cards are accepted across all of the merchants that accept the issuer’s card network |
|---|---|
| Reporting | Card issuers may report payments and usage for both cards to major credit bureaus. |
| Rewards | Secured and unsecured cards can both offer great rewards, cashbacks and benefits to consumers. |
| Interest | Interest is applied on both card types if the balance is not paid in full. |
- First, you make a deposit to get a secured credit card issued to you. The amount of that deposit is your spending limit.
- When you make purchases, they’ll appear on a monthly statement. You’ll be responsible for making payments by the due date.
- Your card issuer will report payment activity to major credit bureaus. Consistent payments and balanced usage can strengthen credit over time and support future eligibility for unsecured cards.
- Building payment history
Payment history accounts for about 35% of a FICO credit score. On-time payments can gradually strengthen credit. - Supporting a credit profile
Having both secured and unsecured accounts can reflect the ability to manage different credit types. - Healthy money habits
Regular use can support tracking spending, planning payments and reviewing statements. - Fraud protection and secure payments
Secured credit cards include standard security and fraud protection features. - Global acceptance
Major secured cards operate on global payment networks. A Visa secured credit card is accepted at more than 150 million merchant locations. - Travel and business expenses
A secured credit card can be useful for work-related expenses, especially business travel, to cover costs such as flights, hotels or meals. This can also help keep work and personal spendings separate.
Credit growth develops over time as you build your credit history. Making regular payments and maintaining a low balance can support a stronger credit score.
Since the credit limit of a secured card is backed by a security deposit, lenders may offer them to people with limited credit as they are easier to obtain and can help demonstrate improved financial habits when used responsibly over time. Many individuals often use secured credit cards to rebuild credit after divorce, bankruptcy or any other event that may have impacted their credit.
There are a lot of people who find using secured credit cards is a good choice for them:
- Young professionals may use secured credit cards when starting employment.
- Students may use secured credit cards for building credit before graduation.
- New U.S. residents may use secured cards to establish credit history.
- Many Americans include secured credit cards as part of a broader credit-building or rebuilding process.
Visa secured credit cards feature exceptional fraud protection and broad global acceptance while supporting responsible credit building.
Could a secured card be the right choice for you? Check out a selection of secured cards designed for first-time applicants or credit rebuilding.
- Secured credit cards can be a low-risk entry point into the credit system.
- Consistent use of secured credit cards can lead to long-term credit improvement.
- Secured cards can be a great choice for anyone who prefers the convenience of using a credit card to using cash or checks.
How long is a secured credit card typically used?
Several consumers opt to get a secured credit card for bad credit, because consistent payments over 6 to 18 months can support stronger credit positioning and future eligibility for unsecured cards.
Does the security deposit get returned?
The deposit remains with the issuer while the account stays active. It can be returned when the account closes in good standing or converts to unsecured status.
Can secured credit cards be used for everyday purchases?
Yes, secured credit cards can be used for groceries, gas, subscriptions, online shopping and larger purchases such as travel.
Can the credit limit increase on a secured credit card?
Limits are often tied to the deposit, commonly ranging from $200 to $500. Higher limits are usually achieved by qualifying for an unsecured card after consistent account activity.
Do secured credit cards have interest and fees?
Secured credit cards can include interest, annual fees or late fees, depending on the issuer.