Secured Credit Cards for Bad Credit

A secured credit card requires an upfront cash deposit from the cardholder, which acts as collateral for the credit line. The deposit minimizes risk for the card issuer, making secured cards an accessible tool for people with no credit history or poor credit to build or rebuild their credit.

Security deposit and credit limit: To open an account, you must pay a refundable security deposit, typically a minimum of $200. This deposit usually sets your credit limit, meaning a $500 deposit would give you a $500 credit limit.

How a secured credit card works

• Security deposit and credit limit: To open an account, you must pay a refundable security deposit, typically a minimum of $200. This deposit usually sets your credit limit, meaning a $500 deposit would give you a $500 credit limit.


• Use like a regular card: Once you make the deposit, the card can be used for everyday purchases, like a traditional credit card.


• Credit reporting: The key to building credit with a secured card is that the issuer reports your payment activity to the major credit bureaus (Equifax, Experian, and TransUnion). On-time payments and low credit utilization help establish a positive credit history.


• Refundable deposit: If you use the card responsibly and close the account with a zero balance, your security deposit will be returned.


• Potential for graduation: Many card issuers offer the chance to "graduate" to an unsecured card after several months of responsible use, at which point your deposit is refunded and you no longer need collateral.



Is a secured credit card right for you?

A secured credit card is a strategic tool for those looking to build or repair their credit. It offers a low-risk way to demonstrate financial responsibility. After successfully managing a secured card for a period, you can often transition to an unsecured card with better benefits and higher limits.