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What is a secured credit card?

Jan. 27, 2023
6 min read
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If you have limited to no credit history or currently have a low credit score, you may not be eligible for most credit cards. Sure, you can use cash or a debit card, but these won’t help you build your credit. So, a better option might be to use a secured credit card.

What is a secured credit card, exactly? Here’s what you need to know.

What is a secured credit card?

A secured credit card, whether personal or for business, requires a security deposit from the cardholder when the account is opened. This security deposit is usually refundable and generally determines your initial credit limit.

Secured credit cards are often used by consumers without credit history or with low credit scores and can be useful for building or repairing credit.

Secured vs. unsecured credit cards


The fundamental difference between secured and unsecured credit cards is indicated by the terms: Secured credit cards require a security deposit whereas unsecured credit cards don’t.

However, whether you should apply for a secured card or an unsecured card comes down to your credit — especially your credit history and credit score.

Most unsecured credit cards require at least average credit since issuers want to avoid the risk posed by consumers with bad and poor credit. You may be able to find an unsecured card that is easy to qualify for even with bad credit, but these cards often have high interest rates.

So, if you have less than average credit, it’s usually a better idea to use a secured card to build your credit before advancing to an unsecured card.

Related reading: The best first credit cards

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How do secured credit cards work?

When you apply for a secured credit card, you generally need to provide your bank account and routing number. If you’re approved, the issuer will withdraw a security deposit from your bank account. The minimum security deposit usually ranges from $49 to $200, but you can often deposit more money to get a higher credit line.

You can use your secured credit card just like an unsecured credit card. Be sure to make payments on time and use your card responsibly, since most issuers will report your credit activity to the three major credit bureaus. This means your account will appear on your credit report and affect your credit score.

If you use your card regularly and pay your bill on time each month, some issuers may provide additional opportunities, such as an increased credit limit or transitioning your account from secured to unsecured. For example, with the Capital One Platinum Secured Credit Card, you’ll be automatically considered for a higher credit line in as little as six months.

For the Discover it® Secured, the issuer will review your credit card account monthly, starting at eight months, to determine whether to return your security deposit.

When you close your account or transition to an unsecured account with the same issuer, you’ll get your security deposit back (if it was refundable) as long as there’s no outstanding balance due on your account. Generally, your security deposit will not earn interest.

The information for the Discover it Secured has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

How to use a secured credit card to build credit

The primary reason to use a secured credit card instead of cash or a debit card is to build or repair your credit since most banks report activity on secured credit cards to credit bureaus.

With a secured credit card, you’ll generally start with a low credit line. So, to build or repair your credit, you’ll initially want to make small, infrequent purchases and focus on paying off your balance in full each month.


The issuer may eventually offer you a higher credit line, which can help your credit score if you keep your utilization low and pay off your balance in full every month. It’s also a good idea to check your credit score regularly while working to build or repair your credit.

There are also other benefits to using a credit card. Most credit cards provide protections that generally aren’t available when you use a debit card or cash, such as no liability on unauthorized purchases. Select secured credit cards also provide other benefits, such as free access to your FICO Score with the Citi® Secured Mastercard® and extended warranty protection with the Capital One Platinum Secured.

The information for the Citi Secured Mastercard has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

Related reading: 3 mistakes people make when they get their first credit card

Do any secured credit cards earn rewards?

Most secured credit cards, whether personal or for business, don’t earn rewards. But, if you’re looking for a secured card that earns rewards and can help you build or repair your credit, the Discover it Secured credit card will likely be your first choice.

The card earns 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter, as well as unlimited 1% cash back on all other purchases. There’s no annual fee on the Discover it Secured and like other Discover it cards, Discover will match the cash back you earn during your first year.

A $200 deposit, bank information and your tax return are required to open your account, but Discover will automatically start reviewing your account monthly after it has been open for eight months to see if you can transition to an unsecured line of credit.

For Capital One products listed on this page, some of the above benefits are provided by Visa® or Mastercard® and may vary by product. See the respective Guide to Benefits for details, as terms and exclusions apply

Additional reporting by Ryan Wilcox.

Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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