Types of Credit Cards: Secured Credit Cards

Advertiser Disclosure Editorial Disclosure

Last updated on March 22nd, 2023

Whether building your credit from scratch or rebuilding it after a few financially tough years, secured credit cards can improve your credit score and increase your credit limit in the future with responsible use. Unlike an unsecured card, a secured card requires a deposit to establish a line of credit.

Secured Credit Cards at a Glance

Secured credit cards are real credit cards that can be used to rebuild your credit if your FICO credit score isn’t as high as you want it to be and keeping you from making the purchases you want. A card issuer usually requires a deposit of 200 dollars or more to get started, and that refundable security deposit serves as the limit that you can spend using the card. Unlike prepaid cards, secured credit cards send credit reports to the three major bureaus as you build a credit history. Over time, an established pattern of responsible financial behavior using a secured credit card can help you qualify for an unsecured credit card the next time that you apply.

Credit Required

You don’t have to have a “good” credit score in order to successfully qualify for a secured credit card. In fact, you’re likely to be approved when you apply for most secured credit cards even if you have “bad” credit or “no credit” at all. This is due to the fact that these types of credit cards are a low financial risk for card issuers as you’ve already provided a deposit in order to open the bank account in the first place.


Credit building is your main priority with a secured credit card, not paying fees when you’re already in a difficult financial situation. Luckily, there are many well-reviewed secured credit cards that you can apply for that have low annual fees (typically under 50 US dollars) or no annual fees at all. You may come across some cards that impose “account fees” or other charges, so as you should with every single credit card you apply for, be sure to read the terms and conditions thoroughly before making your decision.

What to Look for in a Secured Credit Card

Many secured credit cards offer comparable benefits and perks. When searching for a new card, be sure to look out for one with these favorable features.

The Most Important Things to Look for:
Security deposit Part of the reason why airline cards, and travel credit cards overall, are so popular is that they draw customers in with the promise of a massive bonus reward. When they open an account and meet a certain spending threshold – typically between $1,000 and $4,000 – cardmembers will be given a jackpot of anywhere from 10,000 to 100,000 bonus miles, depending on the card. The higher the spending requirement, the higher the reward. Not only would such quantities take a while to accrue through conventional spending, but those sums alone could be worth one round trip flight to thousands of destinations.

While the prospect of several thousand miles in your account is extremely appealing, you should approach the challenge wisely. The best time to apply for an airline card with a signup bonus is when you know you’ll have some hefty spending to do, otherwise, you’ll be scrambling to make potentially unnecessary purchases just to hit that bonus goal. In addition, if you find yourself 50,000 miles richer but $3,000 in debt and no means to pay it all off, you’ll have dug yourself into a nasty hole. Thus, while the signup bonus can, and should, work for you, it can also work against you.
Annual fee Having to pay an annual fee for a secured credit card doesn’t automatically make it unfavorable, though there are many available that waive said charge. If you find a credit card with the limit, APR, and perks that you prefer, paying an annual fee isn’t a bad thing if the benefits are greater than the cost.

Depending on your creditworthiness, you may be able to find a secured credit card that balances both of these aspects perfectly.
Application eligibility The best credit card applications use language that is clear and easy to understand. Select card applications may charge a processing fee, for example, that other similar cards don’t.

This threshold is removed completely when applying for certain secured credit cards, as the deposit you’ll be making covers the risk that the issuer is taking on. While not the case for all secured credit cards, there are some available to you even with a really bad credit rating.
Other Things to Look For:
Upgrade If you use your secured credit card responsibly and pay off your balance each month, in a few years or sooner, you may qualify for an unsecured credit card. These financial products do not require a deposit on your part, and generally offer a better APR and much more enticing benefits, such as a higher return on travel rewards points and cash back on dining and entertainment purchases. Some issuers may automatically switch you over to an unsecured credit card after you’ve established your credit and improved your score. Often you will have to apply for these cards on your own, though you’ll be in a better position to qualify for the unsecured card that you want with your improved credit score in hand.
Credit tools The time that you’ll be spending establishing or building up your credit with the responsible use of a secured credit card is not the time that you should be forgetting to make even a single account payment. Doing so may hurt your credit score and increase the time that it will take you to eventually qualify for an unsecured credit card. Nearly all credit card issuers and financial institutions offer nowadays offer online banking features to help account holders keep track of their expenses 24/7. There are also mobile apps that can be installed on your smartphone and other online electronic devices from these institutions that will alert you if you are approaching your limit or have a payment due soon, making the process of building your credit more convenient than ever before.
Rewards It’s not unheard of to come across secured credit cards that offer cash back rewards, though they are more difficult to find than their unsecured counterparts. Finding one with these benefits can serve as another incentive to use the card responsibly, aside from showing your creditworthiness to the three credit bureaus.

Why Use a Secured Credit Card vs an Unsecured Credit Card or Prepaid Card?

Secured credit cards are great financial tools to turn your financial standing around if you have poor credit or no credit, as using them responsibly can improve your credit score through reporting to the three major credit bureaus in the United States. Prepaid cards, on the other hand, do not report your activity to the three bureaus, so using them won’t boost your credit score.

You may not have the necessary credit to qualify for an unsecured credit card quite just yet, which is where secured credit cards come in. While the APR and benefits offered by some unsecured cards are often more appealing, they may also be far stricter when it comes to their application process in terms of evaluating personal income, assets, and other factors. In time, you’ll get there too.

Check out more

Sub-Prime & Secured Credit Cards

About: Cory
Cory Santos

Cory is BestCards.com's "Jack of all trades" and resident credit expert, covering all facets of the credit card space. Cory holds academic degrees in both the U.S. and U.K. In addition to credit cards, Cory finds that jogging, cats, and memes are essential parts of a balanced day.

Advertiser Disclosure

BestCards is an independent, Florida-based credit card comparison platform. Many of the card offers that appear on this site are from companies from which BestCards receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). BestCards does not include all card companies or all card offers available in the marketplace.

Get the Best Credit Card Content in Your Inbox

Sign up for our newsletter to receive the latest credit card articles and news so you can stay on top of your financial wellbeing.