Secured credit cards operate very similarly to a traditional credit card, but require a security deposit that acts as your line of credit. They’re often much easier to get approved for. When used responsibly, these cards can be a great tool to help build your credit over time.
A secured credit card is a credit card that requires a refundable cash deposit upfront to open your account. The deposit acts as collateral and typically determines the amount of your line of credit. For example, if you put down $200 as your security deposit, your credit limit will be $200.
Secured credit cards may be an ideal option if you have poor or limited credit. With responsible usage, they can help you establish or improve your credit, and eventually graduate to an unsecured credit card. If this occurs, or if you pay off your balance in full and close your account, you’ll get your security deposit back.
A secured credit card works much like any other credit card. They’re issued by most well-known banks and credit unions, and you can use them to make purchases wherever credit cards are accepted.
As mentioned above, secured credit cards require a refundable security deposit that serves as your line of credit. This deposit makes it less risky for a credit card issuer to approve you, since it can be used to cover your balance in the event you don’t pay your bill.
Secured credit cards usually require an initial minimum deposit of $200. But the more you choose to put down, the higher your credit limit will be. When you decide to close your secured card or graduate to an unsecured card, your deposit will be returned back to you as long as your balance is paid off.
Tip: The more you’re able to put down for your security deposit, the better. Your credit utilization ratio makes up 30% of your FICO Score. This is a percentage of how much debt you have in relation to your available credit. It’s best to keep this number below 30% to maintain good credit.Secured credit cards are one of the best tools available to help you build credit. Along with accepting applicants with poor or limited credit, they report your account and payment activity to the three major credit bureaus — Equifax, Experian and TransUnion. Your credit score is then generated using the information from your report.
After demonstrating responsible credit use over time, you’ll be able to build a better credit history and eventually qualify for an unsecured card with more benefits and perks. Here are a few tips to help you build credit with a secured credit card:
Tip: If you want to check your credit score without negatively impacting your credit, sign up for a free credit score through LendingTree Spring.Most major banks and credit unions offer secured credit cards, with the exception of American Express, Chase and Wells Fargo. You’ll receive credit card statements from your issuer like any other credit card and you’ll be able to use your card anywhere the card brand is accepted. If you already have an existing relationship with a bank that offers secured cards, that may be a good place to start because it may boost your approval odds.
Here are the secured credit cards offered by the following banks:
Best overall secured credit cardThe Discover it® Secured Credit Card is our winner for the best secured credit card. It’s one of the best cards available if you have limited / poor credit and are looking for cash back rewards. You’ll earn cash back at gas stations and restaurants, and Discover will match all of the cash back you’ve earned at the end of your first year for new cardholders. Plus, after seven months of owning the card, Discover will start conducting monthly account reviews to see if you’re eligible to graduate to an unsecured card and get your deposit back.
Best if you’re looking for a card with a low depositChoosing the best secured credit card for you depends on your personal financial situation. And if you’re worried about paying a deposit to own a secured credit card, the Capital One Platinum Secured Credit Card may be the best choice. This card comes with a low security deposit. Depending on your credit score you can qualify for a deposit as low as $49 to secure a $200 credit line.
Best if you’re looking for a card with no credit checkIf you’re worried about getting approved for a secured credit card, the OpenSky® Secured Visa® Credit Card may work best for you. There’s no credit check to be approved for the card, meaning you may be able to qualify even if you’ve been denied for other cards. Unlike other secured card options, however, you’ll have to pay a $35 annual fee to own this card.
You’ll apply for a secured credit card the same way you would any other credit card. Once you’ve picked the secured credit card that’s best for you, go to the issuer’s website and complete the application. You may also be able to apply over the phone, in the bank branch or through the mail. You’ll likely need to provide personal and financial information, like your name, date of birth, Social Security number, employment status, annual income, housing costs, email address and phone number.
Tip: If you’re worried about getting approved for a secured credit card, you can check to see if you’re preapproved before you apply.There are also a number of credit cards that don’t require a credit check to be approved.
The main difference between a secured card and an unsecured card is that unsecured credit cards don’t require a security deposit. In addition, they base your credit limit on your credit worthiness, while a secured card bases your credit limit on your security deposit.
Secured cards are often easier to get approved for than unsecured cards since the security deposit creates less risk for a lender. However, unsecured cards may offer more robust rewards programs and benefits, as well as lower interest rates.
Choosing between a secured card and an unsecured card ultimately depends on your credit. Secured cards are a much better option if you have limited or bad credit. There are unsecured cards available if you have bad credit, but you should try to avoid those if possible. Unsecured cards for bad credit often come with confusing terms and extra fees, like setup fees and monthly maintenance fees.
| Secured credit cards | Unsecured credit cards | |
|---|---|---|
| Report activity to credit bureaus | ||
| Can earn rewards | ||
| Require a security deposit | ||
| Credit limit based on your deposit (usually) | ||
| Credit limit based on creditworthiness | ||
| Can apply with poor or no credit | ||
| May have higher interest rates | ||
| May charge an annual fee |
Tip: If you’re worried about paying a deposit, choose a secured credit card with a low deposit.
The Capital One Platinum Secured Credit Card allows you to qualify for a deposit as low as $49 to secure a $200 credit line based on your credit score.
The Secured Self Visa® Credit Card doesn’t require a hard credit check and offers a minimum deposit of only $100. Still, there is a $25 annual fee to own this card.
Some secured credit cards offer a path to graduate to an unsecured card. For example, the Discover it® Secured Credit Card will conduct monthly account reviews after seven months of card ownership to see if you’re eligible to graduate to an unsecured card. You’ll get your security deposit back when you upgrade.
If you regularly make payments on time with your secured credit card, your credit score will gradually improve. You can then continue to monitor your account and credit score until you’re in a good place to apply for an unsecured credit card and close your account. If you’re able to find a card with the option to transition to an unsecured card, that’s the better choice to help with your length of credit history and avoid having another hard inquiry on your credit.
Secured credit cards are one of the best options if you have poor or limited credit and are looking to build your credit score. But just like any other credit card, using your card responsibly and making on time payments are key to building and maintaining a good credit score. Once your credit gets to a good place, you should be able to upgrade to an unsecured card with additional features like, a sign-up bonus, higher rewards rate and other benefits.
All the credit cards on this list are secured cards, meaning you must submit a security deposit to the issuer. This protects the issuer in case you default on what you owe. When determining the best secured cards, we evaluated rewards potential, annual fees, and other features.
Many of the cards on this list earn cash back or points. While building credit should be your primary focus with a secured card, it’s still nice to have the opportunity to earn cash back on your normal spending.
Another factor was annual fees. Most of the secured cards on this list charge no annual fee. The cards on this list do offer enough value to consumers with poor/limited credit that some will find the annual fee worth it.
Finally, if a card has other unique features — such as offering the chance for an unusually low security deposit or requiring no credit check to apply — that was also taken into consideration.
For Capital One products listed on this page, some of the benefits may be provided by Visa® or Mastercard® and may vary by product. See the respective Guide to Benefits for details, as terms and exclusions apply
The information related to the Bank of America® Customized Cash Rewards Secured Credit Card, Bank of America® Unlimited Cash Rewards Secured Credit Card, BankAmericard® Secured Credit Card, Citi® Secured Mastercard®, Discover it® Secured Credit Card, U.S. Bank Altitude Go Visa Secured Card and Wells Fargo Active Cash® Card has been collected by LendingTree and has not been reviewed or provided by the issuer of this card prior to publication. Terms apply.
The content above is not provided by any issuer. Any opinions expressed are those of LendingTree alone and have not been reviewed, approved, or otherwise endorsed by any issuer. The offers and/or promotions mentioned above may have changed, expired, or are no longer available. Check the issuer's website for more details.
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