A secured credit card is a type of credit card backed by a cash deposit that serves as collateral and typically determines your credit limit. Secured cards are designed for people with no credit history or poor credit who cannot qualify for traditional (unsecured) credit cards. By using a secured card responsibly — making on-time payments and keeping utilization low — cardholders can build or rebuild their credit score over time and eventually qualify for unsecured cards.
Secured Credit Card
Definition
A secured credit card is a type of credit card backed by a cash deposit that serves as collateral and typically determines your credit limit. Secured cards are designed for people with no credit history or poor credit who cannot qualify for traditional (unsecured) credit cards. By using a secured card responsibly — making on-time payments and keeping utilization low — cardholders can build or rebuild their credit score over time and eventually qualify for unsecured cards.
Example
A person with no credit history deposits $500 to open a secured credit card with a $500 limit. After 12 months of on-time payments, their credit score improves from no score to 680, and they qualify for an unsecured card. The $500 deposit is then refunded.
Key Points
- 1Requires a cash deposit as collateral
- 2Deposit typically equals the credit limit
- 3Designed for building or rebuilding credit
- 4Responsible use leads to unsecured card qualification