Best Secured Credit Card of April 2024

What is a secured credit card?

A secured credit card is a type of credit card that requires a cash deposit as collateral.

This means they don’t extend a line of credit like unsecured cards. However, secured cards are much easier to qualify for as a result.

If you’re wondering why you would put down cash as collateral to get a credit card, you should note that secured credit cards are often the only type of credit card for people with bad credit or no credit can get approved for. 

Are secured credit cards good?

Secured credit cards can be a great option for people who need to build or rebuild their credit and don’t qualify for many other options. Since they’re backed by a cash deposit, secured cards are far easier to qualify for than unsecured cards.

How does a secured credit card work?

A secured credit card works similarly to how unsecured credit cards work in the sense that you can use them for payments in person or online. However, secured credit cards require a minimum deposit as collateral.

The minimum deposit the cardholder puts down is typically equal to their credit line. For example, if someone puts down a $200 cash deposit, they begin their credit journey with a credit line of the same amount, $200.

If you default on your payments, the company can take your security deposit as payment for your debt. This makes having a secured credit card a bit safer than regular, unsecured credit cards, for both the issuer and the user.

Do secured credit cards build credit?

Yes, secured credit cards can help build credit by reporting to the three major credit bureaus — Experian, Equifax, and TransUnion. Many secured credit cards also offer credit-building tools and services, including a free FICO score on each month’s credit card statement.

How fast will a secured card build credit?

The speed at which a secured card builds credit can vary depending on various factors.

For example, someone with no credit history can begin building credit with a secured credit card and potentially boost their score immediately. However, someone with bad credit or a low credit score may need more time to see a meaningful change in their score.

How a card is used plays a role in how fast it builds credit, or if it does at all. While someone who keeps their balance low and always pays their credit card bill on time can see a positive change relatively quickly, a cardholder who maxes out their credit limit or pays their bill late could see their credit score plummet.

Who should consider a secured credit card?

Secured credit cards are best for:

• People who have bad credit
• Individuals with no credit history
• Anyone who can’t get approved for a better card

Typically, consumers with “fair” credit or better (FICO scores from 580 to 669) should look for unsecured credit cards instead.

Secured credit card pros and cons

Is a secured credit card good? - The answer to this depends on how you plan to use it and if you need this type of credit card to begin with.

Differences between a secured vs unsecured credit card

Secured cards require a cash deposit as collateral, whereas unsecured cards do not require any collateral. Here are a few of the major differences between secured and unsecured cards.

Secured credit cards vs. debit & prepaid cards

On the other hand, debit cards are payment cards that are linked to your checking account. This means purchases you make with a debit card are ultimately deducted from funds you already have. While a debit card can help you avoid debt, these cards don’t help you in terms of creditworthiness.

There are also other types of cards, such as charge cards and prepaid cards. Prepaid cards let you fund your card upfront so you can use the money for spending. However, prepaid cards don’t extend a line of credit and they don’t help you build credit, either.

How to apply for a secured credit card

The process of applying for a secured card is similar to applying for an unsecured one, but with a few extra steps.

Do I get my deposit back with a secured credit card?

Getting your deposit back is possible in two different scenarios. Either your credit card issuer lets you upgrade from a secured card to an unsecured card, or you decide to close your secured card with a $0 balance.

In either scenario, you’ll receive your deposit back in as little as 5 to 7 days after you move on from your secured card.

Using your secured card

You can use your secured credit card for purchases in person or online, but you should pay attention to your low credit limit. Your best bet with secured cards is only charging what you can afford to pay with cash and paying your credit card balance in full by your due date each month.

How do payments work?

Secured credit cards do payments just like unsecured cards. You’ll receive a bill for your balance owed at the end of each billing cycle, and you can pay your balance online, with a check in the mail, or even over the phone.

How to use a secured credit card to build credit

If you want to maximize the benefits of your secured credit card, you’ll need to use it in a specific way. The following tips can help you get the most out of your secured credit card experience:

• Compare secured credit cards to find the right fit.
  Make sure to compare the best options based on their fees, interest rates, required minimum deposit, and rewards.
• Only purchase items you have the cash to pay for.
  Even though it’s a secured card, it’s important not to overspend so you can build good credit habits. This step can help you avoid racking up long-term debt and learn to use credit wisely.
• Set up payment alerts to avoid missing payments.
  Your payment history is the most important factor that makes up your credit score, so you should keep your payments up-to-date at all costs.
• Avoid late payment fees by setting up auto-pay.
  Setting up auto-pay for at least the minimum payment on your card can help you avoid a credit mishap.
• Keep your credit utilization on the low end, even at $0.
  Most experts suggest keeping your credit utilization rate below 30% for the best results. This means maintaining a balance of $60 or less if your credit limit is $200.

How do I close a secured credit card?

You can close your secured credit card by calling the number on the back and making a request to the credit card company. Note that you’ll still be required to pay any balances owed at that point, but you’ll get your deposit back if you close your account in good standing.

It’s important to note that closing a credit card can hurt your credit. Keep in mind that some secured cards let you graduate to a normal credit card as well, so you may want to consider these as alternatives before closing a secured credit card.

How can I change a secured credit card to an unsecured card?

To change a secured card to an unsecured card, you’ll need to use credit responsibly until you have a good enough credit score to qualify for a different type of card. Typically, this means waiting until your score moves into at least the “fair” range.

Some secured cards, like the Capital One Quicksilver Secured Cash Rewards Credit Card, also have a process that helps you “graduate” to an unsecured card with responsible use.

Alternatives to secured credit cards

Secured credit cards aren’t the only way to build credit, here are a few other options:

• Unsecured cards for bad credit: Some credit card issuers offer unsecured cards specifically for people with bad credit. These cards don’t require a security deposit but often have low credit limits, high interest rates, and various fees.
• Becoming an authorized user: You may be able to start building your credit by becoming an authorized user on a parent, guardian, or friend’s account. Essentially, this would give you your own credit card attached to the primary cardholder’s account. Any purchase you make would be charged to the primary cardholder and would be their responsibility to pay off. 
• Prepaid debit cards: Debit cards are similar to gift cards; you load the card with your money and can use the card to make purchases. You can reload the card at any time and continue using it. A perk of debit cards is that there are no interest charges since payments are being automatically covered by money in your account. On the other hand, these cards don’t help to build credit. It also may be more difficult to rent a car with a debit card, and some merchants won’t accept them at all.
• Credit-builder loans: A credit-builder loan holds money in a savings account that earns interest. You then pay off the loan in monthly installments and the lender reports those payments to the credit bureaus. Once you’ve finished paying off the loan, you’ll be able to access the funds and do with them as you please.

Related topics

• What is a bad credit score?
• Best credit cards for bad credit
• Best credit cards for no credit
• How to build credit
• How to raise your credit score fast
• What is a good credit score?