Secured credit card
Also called: secured card
A secured credit card is a credit card backed by a cash deposit, with a credit limit that often matches the deposit. You make purchases and pay the bill as with any credit card, and reported on-time payments can help build a credit history.
By Beacon · Updated
How it works
You apply much as you would for a traditional card. Once approved, you put down a deposit that the bank holds in a separate account, and it extends a credit line that generally matches the deposit. Purchases create a balance that you repay from your own money; paying the bill restores your available credit. The deposit stays with the issuer as security rather than paying the monthly bill.
The credit-building value comes from reporting. When an issuer reports your payments to the three nationwide credit reporting companies, each on-time payment adds to your history. Reporting is worth confirming with the issuer before you apply, along with any fees and how the deposit is returned. Many secured cards offer a way to move to a traditional card after a record of consistent payments.
Because the limit often equals a modest deposit, utilization can climb quickly: a $150 balance on a $200 limit is 75% of the limit. Credit scoring models look at how close you are to being maxed out, and CFPB guidance notes that experts advise keeping use at no more than 30% of your total credit limit.
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Sources and further reading
Examples are illustrative and focus on U.S. personal finance. This page is educational, not individual financial, investment, tax, or legal advice. Read our editorial approach or report a correction.