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How Do Secured Credit Cards Work?

How Do Secured Credit Cards Work?

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• Updated: March 02, 2020


Maybe you’re feeling a bit blue. You’re trying to obtain a credit card, but your applications keep getting rejected. You’re having trouble reserving a hotel room, rental car, or airline flight. All of your friends with credit cards are living it up, and you’re starting to feel … well, like a loser.

Maybe you’ve made some bad decisions in the past. Or perhaps you can’t qualify for a credit card because you don’t have enough of a credit history -- which you are unable to do anything about, because you simply can’t get a credit card! Related: Securing your first credit card: doing it right from the start

The answer is simple. Presenting … the secured credit card.

A secured credit card works exactly like a traditional credit card when you use it at stores, restaurants, e-commerce websites, or anywhere else. You make a purchase, get what you want immediately, and pay the bill off over time.

The difference lies in how the account is first set up. With traditional credit cards, the issuing company sets your credit limit and can impose strict penalty fees if you exceed that limit or miss a payment. This arrangement makes it easy to rack up a lot of debt before you know it.

But a secured credit card actually gives you more control over your account. You deposit an amount of money with the bank or institution that gives you the card. If for some reason you miss a payment, the card company takes it out of the initial security deposit. It is important to note that the security deposit does not necessarily represent your credit limit. Some secured credit cards let you put down a security deposit (such as $95), which allows you to use the card as if it had a higher credit limit (say, $300). In any case, the money is fully refundable when you close the account, and the balance is repaid in full. Keep Reading: Top 5 secured credit cards

In addition, your secured credit card gives you a tool to reserve a hotel room, rent a car, or buy tickets online for a concert. Many times, you can even use the credit card for the reservation, but pay for the service with cash (this works well if you and a few others are pitching in for the purchase).

But here’s the best part of having a secured credit card: if you make your payments each month on time, the card company reports this to your credit bureau. These reports are often made on a monthly basis, which in turn helps boost your credit worthiness more quickly and establish a solid credit history for you in a shorter period of time. Plus, some secured credit cards reward you for this “good credit behavior” by increasing your credit limit without asking for additional security deposit funds from you. Think of it as your own special rewards program!

So you don’t need to feel like the world is passing you by because you can’t get a credit card. Check out some of the secured credit cards that are available today – and start living “the good life” tomorrow! is a credit card comparison site. We have been providing our customers with the best credit card offers available since 2010. If you are looking for a new credit card, visit us here

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