• Skip to primary navigation
  • Skip to main content
  • Skip to footer

FinanceJar

FinanceJar

Take the next step on your journey

  • Credit Scores
    • Get Free Credit Score
    • Get Your Free FICO Score
    • Credit Score Range
  • Credit Repair
  • Credit Reports
    • Credit Inquiries
  • Credit Cards
    • Credit Card Reviews
    • Best Credit Cards for Bad Credit
    • Fair Credit
    • No Credit
    • Building Credit
    • Secured
    • Unsecured
    • 0% Interest
    • No Annual Fee
    • Guaranteed Approval
    • No Credit Check
    • No Foreign Transaction Fee
    • Gas
    • Students
  • Debt
    • List of Collection Agencies
  • Loans
  • About Us
  • 24/7 Support:

    323-649-8707

Home Credit Cards What Is a Secured Credit Card?

What Is a Secured Credit Card and How Does It Work?

Man demonstrating what a secured credit card is

At a glance

Secured credit cards are credit cards that require a security deposit upfront and offer limited lines of credit.

Written by Kari Dearie

Reviewed by Robert Jellison

Sep 28, 2022

Fresh advice you can trust

We promise to always deliver the best financial advice that we can. Our writers and editors follow strict editorial standards and operate independently from our advertisers and affiliates. Learn more about how we make money.

If you’re new to borrowing or you’re recovering from financial difficulties, opening a line of credit can be difficult. Luckily, there are options out there for borrowers with bad or limited credit. Some of the easiest credit cards for you to get will be secured credit cards.

Learn what a secured card is, how it works, and whether it’s the right borrowing option for you.

Table of Contents

  1. What is a secured credit card?
  2. How does a secured credit card work?
  3. How to use a secured credit card
  4. Should I get a secured credit card?

What is a secured credit card?

A secured credit card is a credit card that can only be opened if you put down a security deposit. A security deposit on a credit card acts as collateral in case the borrower fails to pay back the card’s balance, in which case the card issuer can keep it as compensation for their loss.

This is why secured credit cards are sometimes the only cards available to borrowers with bad credit scores (or no credit score at all). The deposit makes these cards much less risky for lenders.

Secured credit cards usually offer credit limits equivalent to their security deposit. The credit card issuer will specify a range (like $200–$1,000) and the borrower can put down any amount within that range to get an equal credit limit.

Who should get a secured credit card?

Secured credit cards are good borrowing options for people:

  • With no credit history or a limited credit history (with the exception of college students)
  • With bad credit scores
  • With derogatory marks, like a bankruptcy or foreclosure, on their credit reports


Why shouldn’t a student get a secured card?

New borrowers who are currently enrolled in a degree program should consider unsecured student credit cards before committing to a secured credit card. Credit cards for students are designed for new borrowers, so your lack of credit history won’t necessarily prevent you from getting one.

How does a secured credit card work?

Secured credit cards work like any other credit card. You have an allotted credit limit to spend on the card. Each month, you have to pay back the amount you borrowed or the balance will accrue interest (additional charges).

There’s also always a monthly minimum amount that you have to pay or you’ll get hit with late fees (and potentially other consequences as well).

Secured credit cards vs. unsecured credit cards

Even though they operate similarly, there are some notable differences between secured and unsecured credit cards:

  • Unsecured credit cards don’t require a security deposit, which also means that the credit limit they offer is unrelated to a deposit amount.
  • Unsecured credit cards tend to have higher credit limits.
  • Many unsecured credit cards have better borrowing terms (like lower interest rates).
  • Many unsecured credit cards have more perks and rewards than secured credit cards.
  • Most unsecured credit cards require good to excellent credit (though there are unsecured credit cards for poor credit on the market).

Generally speaking, unsecured credit cards come with better terms and more perks. They also make up the majority of credit cards available.

However, if you’re unable to qualify for a worthwhile unsecured card, you can use a secured credit card to build your credit and then either upgrade that card to an unsecured equivalent or use your improved credit to qualify for a completely new unsecured card.

Secured credit cards vs. prepaid cards

People sometimes confuse secured credit cards with prepaid cards. These cards resemble one another at first, but they function quite differently.

When you use a prepaid card, you have to load it with money, which you can then spend until it’s gone. They must be reloaded each time you need funds on the card, so every purchase on the card is essentially paid for in advance.

In contrast, secured cards require a security deposit upfront, then you can spend up to that limit on credit. You can’t use the initial security deposit to make a payment; you have to pay back your purchases after you make them.

How to use a secured credit card

To use a secured credit card, follow these four steps.

1. Apply for a secured credit card

The first step to using a secured credit card is to find a card and apply. To find the right card, look through the best secured credit cards available today, then figure out which one meets your needs in the following areas:

  • How much credit do you want?
  • How large of a deposit are you willing to pay?
  • Are you willing to pay an annual fee?
  • Do you want cashback rewards?
  • Do you want a card with credit-building features, such as access to your free credit score?
  • Do you need to be able to use your card abroad?

Once you find the right secured card for you, submit an application. Note that when you apply, you may have your credit checked through a hard inquiry, which will knock several points off your credit score.

However, some secured credit cards don’t perform a credit check. Look for cards that advertise this if you don’t want a hard inquiry (or are worried about qualifying for a card with your current credit).

2. Place a refundable security deposit

To an extent, the size of your security deposit will depend on what the credit card issuer requires, but you have some ability to adjust it based on your own budget. Most secured credit cards have a minimum security deposit of $200, although a few offer even lower minimums.

How much you put down will likely determine your credit limit, so keep this in mind when deciding what to pay.

You’ll either be asked to place your deposit as part of the application process or upon approval. Most secured cards will require you to link a bank account and use that account to put down your deposit. However, some secured credit cards will allow you to place a deposit through a check or money order and don’t require a bank account.

3. Make purchases and payments on your secured credit card

Once you get your secured credit card and activate it, you can use it as you would any other credit card. Make purchases on the card within your credit limit, they pay off the balance by the due date.

It’s critical to make your payments on your secured card on time. One of the main purposes of a secured card is to build credit. If you miss a payment or pay late, your issuer will probably report it to the credit bureaus, which will hurt your credit score, defeating the point of opening the card in the first place.

Understanding the billing cycle on a secured credit card

Your credit card’s billing cycle will act the same as an unsecured card’s. After the statement closing date, you’ll be given a bill for your statement balance, which will include the minimum amount you need to pay by the due date.

If you fail to pay your minimum, you’ll be charged fees and potentially hit with a penalty interest rate. Conversely, if you pay your entire bill by the due date, you won’t be charged interest for that cycle’s purchases.

Many secured credit card issuers report all payment activity to the credit bureaus, so borrowing responsibly can help you build a positive credit history and improve your credit score.

4. Get your security deposit back

Most secured credit cards allow you to get your deposit back when you:

  • Upgrade your card
  • Close your account

How to get your deposit back by upgrading

If your card issuer offers credit card upgrades (also called card graduations) to an unsecured card, wait until you’ve spent some time borrowing responsibly with your credit card, then call the customer service team and ask if you’re eligible for an upgrade. If they allow you to upgrade, you’ll probably be given your deposit back when the credit account switches over.

How to get your deposit back by canceling your card

If you’re ready to close your account and get an unsecured credit card, make sure your account balance is at zero. Then follow the steps to close your credit card correctly.

If your card issuer’s policy is to return your deposit on account closure (which is the case for most secured cards), you’ll get your deposit back (likely through a check or money transfer) when your account is officially closed.

Should I get a secured credit card?

Getting and using a secured credit card is a great way to build credit if you have a bad credit history or a thin credit file. To decide whether or not a secured credit card is the right option for you, consider the benefits and drawbacks:

Pros:

  • Helps build credit
  • Easy to get
  • Borrowers with bad credit and no credit can qualify
  • Limited amount of credit to spend (low risk)
  • May not require a credit check

Cons:

  • Security deposit required
  • Lower credit limit
  • Credit limit determined by deposit
  • Rewards are rare
  • Usually higher APR

In general, getting a secured card is a great option if you need a tool to rebuild your credit after damaging it (or build it from scratch), but eventually you’ll want to upgrade to a better card with fewer downsides.

Takeaways: A secured credit card requires a security deposit.

  • A secured credit card is a credit card that can only be opened after you put down a security deposit.
  • Secured credit cards are available to risky borrowers (like those with bad credit or no credit), because the security deposit acts as collateral.
  • The amount you put down as a deposit will likely determine the credit card’s credit limit.
  • Secured credit cards work like other credit cards, lending money that then gets paid off over time.
  • You should consider getting a secured credit card if you have a limited borrowing history or bad credit and want to build back your credit score.

Kari Dearie

Credit Cards Editor

View Author

Kari Dearie is an editor for FinanceJar specializing in credit and personal finance. She previously managed a B2B website in the data privacy and digital compliance industry.

Related Articles

Secured credit card and credit score gauge on a scale representing raising your credit score
Credit Cards

Aug 26, 2022

How Much Will a Secured Credit Card Raise Your Credit Score?

The exact number of points your credit score will increase by when...

Victoria Scanlon
Secured Credit Cards with No Annual Fee
Credit Cards

Updated Oct 17, 2022

5 Best Secured Credit Cards with No Annual Fee in May 2025

Secured credit cards can be expensive, especially if you need to...

Kari Dearie
Unsecured credit card with a credit score gauge showing bad credit
Credit Cards

Updated Oct 21, 2022

Best Unsecured Credit Cards for Bad Credit in 2025

Having bad credit limits your borrowing options. If you don’t want...

Kari Dearie
Gun being bought with a credit card
Credit Cards

Nov 10, 2022

Can You Buy a Gun with a Credit Card?

You can use a credit card to purchase a gun, but not in every...

Victoria Scanlon
Credit card with a Closed sign with a credit score gauge
Credit Cards

Aug 4, 2022

Does Getting Denied for a Credit Card Hurt Your Credit Score?

Getting denied for a credit card won’t hurt your credit score, but...

Renée Chen
Credit card in the process of being activated
Credit Cards

Updated Dec 3, 2022

How to Activate a Credit Card

Activating a new credit card is a simple but important step that...

Victoria Scanlon
FinanceJar

Footer

Credit

  • Credit Scores
  • Credit Repair
  • Credit Reports
  • Credit Cards
  • Debt

Company

  • About Us
  • Contact Us

Legal

  • Terms & Conditions
  • Privacy Policy

Call Us

9AM – 9PM EST: 347-527-4868
24/7 Help Line: 323-649-8707

How We Make Money

We make money from advertising. We place links on our website to our affiliates, and when you click those links, our affiliates compensate us for it. Our relationships with our affiliates may affect which products we feature on our site and where these products appear in our articles.

Facebook Twitter Instagram TikTok YouTube LinkedIn Pinterest

© 2025 – ONR Financial Networks LLC – All Rights Reserved.

  • Credit Scores
    • Get Free Credit Score
    • Get Your Free FICO Score
    • Credit Score Range
  • Credit Repair
  • Credit Reports
    • Credit Inquiries
  • Credit Cards
    • Credit Card Reviews
    • Best Credit Cards for Bad Credit
    • Fair Credit
    • No Credit
    • Building Credit
    • Secured
    • Unsecured
    • 0% Interest
    • No Annual Fee
    • Guaranteed Approval
    • No Credit Check
    • No Foreign Transaction Fee
    • Gas
    • Students
  • Debt
    • List of Collection Agencies
  • Loans
  • About Us
  • 24/7 Support:

    323-649-8707

We hope this template helps you achieve your goals.

Would you please review us?

A review would mean a lot to us — and takes less than 20 seconds. Let us know what you think. Thanks!

Leave My Review

What you’ll get

  • Assess

    Fill in your information and we will securely pull your TransUnion credit report.

  • Address

    We challenge inaccurate negative items with the bureaus and your creditors.

  • Advise

    We will give you advice for how you can improve your credit. Don’t want to wait? Call us now.

Don’t want to wait? Call us!

Monday to Friday, 10AM - 7PM EST

FinanceJar

Get a FREE 5-minute credit consultation.

Get a credit improvement plan that works for you with 1 phone call.

What you’ll get

1
Assess

Fill in your information and we will securely pull your TransUnion credit report.

2
Address

We challenge inaccurate negative items with the bureaus and your creditors.

3
Advise

We will give you advice for how you can improve your credit. Don’t want to wait? Call us now.

This is completely secure and won’t hurt your credit score.

By clicking "Submit" I agree by electronic signature to: (1) be contacted about credit repair or credit repair marketing by a live agent, artificial or prerecorded voice and SMS text at my residential or cellular number, dialed manually or by autodialer, and by email (consent to be contacted is not a condition to purchase services); and (2) the Privacy Policy and Terms of Use.

Don’t want to wait? Call (888) 859-0871 now

FinanceJar

Advertising Disclosure

Some of our articles feature links to our partners, who compensate us when you click them. This may affect the products and services that we showcase in our articles and how we place and order them. It does not affect our evaluations of them, which our writers and editors create independently, without considering our relationships with our partners.

FinanceJar

Editorial Standards

We promise to always deliver the best financial advice that we can. That’s our first priority, and we take it seriously.

To ensure that our articles and reviews are objective and unbiased, our writers and editors operate independently from our advertisers and affiliates. Our writers do not take FinanceJar’s relationship with its affiliates into consideration when writing their reviews and articles.

Everything we publish is as accurate and as complete as we can make it. All of our articles undergo several rounds of fact-checking before we publish them, and we do our best to keep them as no-nonsense and jargon-free as possible while still delivering the information that you need.

We know that taking financial advice from us requires a lot of trust on your part. We’re grateful for that trust, and we won’t abuse it. Learn more about our editorial standards.

FinanceJar

How We Make Money

FinanceJar partners with other companies in the credit and finance industry, such as credit card issuers and credit repair companies.

We make money through advertising. Our pages feature links to our partners’ websites. If you click on one of those links, we get paid.

The links to our partners are always clearly marked. You’ll always be able to tell what you’re clicking. We’ll never try to trick you into clicking anything you’re not genuinely interested in.

That’s the only way that we make money. We don’t accept compensation in exchange for reviews or articles, and we don’t directly sell any products or services ourselves. Our editorial team operates independently (with no influence from our affiliates or our advertising team) so as to avoid compromising the objectivity of our reviews. Learn more about how we make money.