Everything you need to know about secured credit cards


If you’ve ever applied for a credit card and got denied, then you’ve probably been offered some kind of secured credit card. Many people have heard of these types of cards, but don’t have much information about them. To help explain things a little better, we’ve put together this post that will tell you everything you need to know about secured credit cards.

Secured Credit Card Definition

A secured card is a type of credit card that needs a cash deposit before it will become active. This deposit is paid by the person applying for the card and the money is lost if payments aren’t made. Most of the time, the amount of the deposit is the amount of your credit limit and different card issuers will have different deposit requirements. There are 2 ways to get your deposit back, including getting approved for an unsecured card after showing a good repayment history or completely paying off your card and closing your account.

Unsecured vs Secured

The biggest difference between a secured credit card and an unsecured card is that the secured card needs a cash deposit and an unsecured card does not. Another big difference is that you need a higher credit score to get an unsecured card because they are essentially loaning you money. One final difference between these 2 types of cards is that an unsecured card tends to have better rewards and features than a secured card. Keep in mind, some issuers offer great rewards regardless of what kind of credit card you have.

Eligibility Requirements

For starters, most card issuers are going to require you to have a certain credit score regardless of which type of card you’re applying for. Another requirement is that the cardholder needs to pay the cash security deposit to establish a credit limit. Different cards will have different deposit limits, so make sure you’re checking. In addition, you’ll need to show that you have verifiable income and show that you can pay your monthly bill. If you’re wondering what the exact requirements are, you should look at the information for the particular card you’re applying for.

Credit Building Information

The great thing about a secured credit card is that it can be a huge help when trying to rebuild your credit. After paying your deposit and activating your card, there are a couple of things you can do to help build your credit. These things are paying your bill on time every month and keeping a low balance on the card. In addition to raising your score, doing these things can show that you’re a reliable borrower, which could lead to an offer for an unsecured card.

Secured Credit Card APR

Most creditors offering a secured credit card will give everyone the same APR, while an unsecured option usually has a variable rate. All of this information should be included in the documents you’ll need to sign before you can activate the card. Since some creditors will offer variable rates for their secured cards, those with higher credit scores and better marks on their credit report will get better rates than someone with a low score and a lot of negative marks.

Possible Other Fees

Just like you would with an unsecured card, you want to make sure you know and understand any extra fees you’ll need to pay. Not only does this include the APR, but things like fees for certain features, monthly account fees, and any retail specific fees. All of this information should be available to you before accepting the card, but you can reach out to the creditor if you don’t see it. Keep in mind, some creditors won’t have these extra fees for secured card holders.

Benefits of Secured Cards

One of the most important things to know about a secured card is the kind of benefits the cardholder can get by using one. We’re going to talk about just a few but it should give you an idea of the benefits you can expect.

  • They are relatively easy to get approved for.
  • Great for rebuilding credit.
  • As long as you pay, you’ll get your security deposit back.
  • They can prepare you for an unsecured card.

Disadvantages of Secured Cards

Like most things in life, secured credit cards also have some disadvantages. These things might not seem like much to some, but for others they’ll be the reason they choose another card. Take a look below to see an organized list of some of the disadvantages.

  • The cash deposit needs paid upfront.
  • There could be extra fees.
  • There may be less rewards available.


While some secured cards won’t offer anything, others will have a few good rewards available. This is going to vary greatly from creditor to creditor and this information should be in the disclosure forms. With that said, listed below are some of the rewards or extras you could get with a secured credit card.

  • Cash back
  • Points for redemption
  • Travel miles
  • Priority services

Secured Card Alternative

If you’ve been applying to get a secured credit card, but can’t get approved, the best option would be to get a prepaid card. The biggest consideration with that is that you’ll want to look for one that offers services to help build your credit. Once you find this, you’ll have a prepaid card that works the same way as a secured card.

Now that you’ve read through this post and have a better understanding of secured credit cards, you should be able to make a decision about whether or not you could benefit from getting one. Not only should you consider you’re personal situation and needs, but you also want to make sure you research any secured card you’re applying for. Find one that’s best for you!

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