Why Secured Credit Cards Help Build Credit

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Last updated on August 23rd, 2023

A secured credit card could be a great way to build credit. More so when you have little to no credit or if you’re in the process of fixing your credit. Familiarize yourself with the benefits of a secured credit card and how it can help improve or build your credit. Here’s what you need to know.

What is a Secured Credit Card?

A secured credit card operates just like a regular credit card, except it requires a cash deposit to act as your credit limit. With a secured credit card, you must pay the cash deposit upfront to act as collateral for any purchases you make. In the case that you miss a payment, the credit card issuer can use the deposit to repay themselves, therefor the payment is secured, hence the name, secured credit card.

In many ways, a secured credit card is like a debit card because you are using your own money to make purchases instead of borrowing from the card issuer. The major difference you will notice between a secured credit card and a debit card is that one affects your credit score. Debit card bank issuers do not report your usage to the credit bureaus. In contrast, monthly purchases and payments for a secured credit card are reported to credit bureaus, therefore making an impact on your credit.

Most importantly, secured credit cards are more accessible than your average credit card because there is less risk involved for lenders. The upfront cash deposit ensures the bank will not lose money by creating a line of credit in return. Secured credit cards are an accessible option for anyone looking to improve or build credit.

First Progress Platinum Prestige Mastercard®

Applied Bank Secured Visa® Gold Preferred®
A discharged bankruptcy still in your credit bureau file will not cause you to be declined Absolutely No Credit Check or Minimum Credit Score Required
Quick and Complete Online Application; No credit inquiry required! Automatic Reporting to All Three National Credit Bureaus
Monthly Reporting to all 3 Major Credit Bureaus Activate Today with a $200 Minimum Deposit – Maximum $1,000
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Why Not Opt for an Unsecured Card?

Unlike a secured credit card, an unsecured credit card does not require an upfront cash deposit to act as a credit limit. Instead, lenders approve applicants based on their credit scores. As you can see, if you’re someone who is in the process of building or fixing credit, then an unsecured credit card might not always be ideal to seek.

However, both secured and unsecured credit cards operate alike. Both cards will have a credit limit, and both may offer rewards for purchases. Both cards might also charge interest fees and other basic credit cards fees like foreign transaction fees, or annual fees. An unsecured credit card may be tougher to qualify for due to the higher risk factor card issuers face. Although, it may result in a lower interest rate for cardholders, better card perks, and a higher credit limit.

Surge® Platinum Mastercard®

Applied Bank® Unsecured Classic Visa® Card

Revvi Card
The Surge Mastercard® from Celtic Bank can be an ideal pre-qualification option if you need to repair or continue building your less-than-perfect credit score. The Applied Bank® Unsecured Classic Visa® Card is a credit card designed to help you build your credit score. Revvi is a full-fledged Visa® credit card that can help you improve your credit score with on-time payments and responsible use.
Up to $1,000 credit limit doubles up to $2,000! (Simply make your first 6 monthly minimum payments on time) A $300 unsecured credit line which can be used at grocery stores, gas stations, discount stores, ATMs and online Earn 1% cash back rewards^^ on payments made to your Revvi Credit Card

Why a Secured Credit Card Might be Right for You?

If you’re looking to establish or build credit, with responsible use, a secured credit card can get you there. When you have little or no credit, to begin with, it may be difficult to qualify for an unsecured card. It is important to note unsecured credit cards for bad credit do exist. You just typically have to be willing to pay an annual fee for them and sometimes deal with slightly higher interest rates.

Next, if you don’t mind the upfront cash deposit, a secured credit card might be a good option for your credit-building journey. Either way, the deposit will be returned to you once the account is closed. You’re not losing any money (unless there’s an annual fee or an unpaid balance.)

Another reason to get a secured credit card is to work your way up to an unsecured credit card. Use a secured card to improve your credit score. Once you establish a healthier credit score, you get better approval odds with other sought-after unsecured credit cards. Some secured credit card issuers will upgrade your card to an unsecured credit card after a set time frame and responsible use.

Card Features Annual fee

First Progress Platinum Elite Mastercard®
  • Receive Your Card More Quickly with New Expedited Processing Option
  • No Credit History or Minimum Credit Score Required for Approval
  • Quick and Complete Online Application; No credit inquiry required!
  • Includes Free Real-Time Access to Your Credit Score and Ongoing Credit Monitoring powered by Experian

OpenSky® Secured Visa®
  • No credit check to apply and find out instantly if you are approved
  • OpenSky gives everyone an opportunity to improve their credit with an 85% average approval rate for the past 5 years
  • Get considered for a credit line increase after 6 months, with no additional deposit required
  • You could be eligible for the OpenSky Gold Unsecured Card after as few as 6 months
  • Reports to all 3 major credit bureaus monthly, unlike a prepaid or debit card

Self Visa® Secured Credit Card
  • Get the savings plan that helps build credit today
  • Start with a Credit Builder Account that reports monthly payments to all 3 major credit bureaus
  • No credit score is needed to get started
  • Your money is secured and protected in a bank account

First Progress Platinum Select Mastercard®
  • Receive Your Card More Quickly with New Expedited Processing Option
  • No Credit History or Minimum Credit Score Required for Approval
  • Quick and Complete Online Application; No credit inquiry required!
  • Includes Free Real-Time Access to Your Credit Score and Ongoing Credit Monitoring powered by Experian
  • Full-Feature Platinum Mastercard® Secured Credit Card; Try our new Mobile App for Android users!
  • Good for Car Rental, Hotels; Anywhere Credit Cards Are Accepted!

Why a Secured Card Might Not Be For You

  • High fees and interest rates
  • Low credit limits
  • Cash Deposit Required

Should You Get a Secured Credit Card?

If you have little to no credit and you want to better your credit score, a secured credit card could come in clutch. A credit card is one of the best tools to use for improving your credit. When you have a short credit history or none, you may encounter some obstacles when you apply for other unsecured cards. Bypass the hurtle with a secured credit card to begin your journey to better credit for overall improvement in your finances.

Related Article: The Best Secured Credit Cards

Featured image by Katya Havok/Canva

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About: Jeannyn Gomez
Jeannyn Gomez

Jeannyn is the Content Management Assistant for BestCards.com. In addition to serving on all aspects of social media and spreading the word on expert credit and personal finance advice, Jeannyn finds herself on quests for humor, supernatural phenomena, and conspiracy theories for fun.

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