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What Is a Secured Credit Card?

Is a Secured Credit Card Right For You?

If you're having trouble getting approved for a credit card, you'll quickly become familiar with the secured credit card, which is often offered up as an alternative. But what exactly is it and how can you tell if it's right for you?

What is a secured credit card?

Basically, a secured credit card extends a line of credit to you that has been secured by your cash deposit. So if you place a deposit of $500 as collateral, the card will extend a credit of $500 to you. If you don't make your payments on time, the bank will take money from the deposit to pay off your debts. 


  • Easy approval. People who can't get approved for a regular credit card because they have bad or little credit history can usually get approved for a secured credit card.    
  • Build up credit. Getting a secured credit card might be one of the few ways for people to build up credit if they have little or no credit. On-time payments will help you establish or reestablish a better credit score, and if you have a good track record, your bank may let you convert the secured credit card to a regular credit card.  


  • High fees: Because secured credit card holders tend to be high risk, the fees can be extremely high. You may have to pay high application and annual fees.
  • High interest rates: The interest rates can be higher than regular credit cards, which you can avoid by making sure you pay off what you owe each month. And the penalty you'll pay when you carry a balance over to the next month can be upward of 30 percent.    
  • Credit limit: This can easily be a con depending on how you look at it. But you'll typically only be able to spend up to the amount you put in as collateral with a secured credit card, which will help keep your spending in check.  
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