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What is a Secured Credit Card?

What is a secure credit card? a secured credit card is one that requires a deposit or collateral up front. In most cases, this deposit must be made in cash, although there are some lenders that will accept collateral in the form of homes, cars.

What is a Secured Credit Card?

For personal or business, credit cards play in important role in building and strengthening your finance profile. They can also cause a snowball of negative effects if improperly used as well. If used properly, building your credit can become a tremendously and powerful tool in obtaining assets you need. These assets could be for a future car loan, home, or even business opportunities.

Unfortunately, most have been in a situation where getting a credit card could be difficulty due to bad or non-existent credit. This is where a secured credit card becomes one of the next viable option in obtaining a credit card. Obtaining this, will help you establish or rebuild your credit with good credit habits.

Secured Credit Card? So what is it really?

A secured credit uses money you place in a security deposit account as collateral in exchange for a credit line. Your credit line amount will be based on several factors such as income, your ability to pay and the amount of money that you deposited. Some lenders will accept collateral in the form of homes or cars, etc.

Why do I need a secured credit card?

Many individuals have difficulty getting unsecured credit cards either due to have bad or non-existent credit. If your trying to establish credit or rebuild your credit, then a secured credit card is most viable option in getting approved for a credit line. The security deposit ensures the lender that there is a collateral in case you do not pay them back. If so, they would simply close down your account and take your deposit.

After getting approved for a secured card, they work just a like a regular credit card. You may make purchases anywhere your credit card form is accepted. They work a little bit different from ATM Debit cards, as they report the major credit reporting agencies.

Having a secured credit card and using it properly with good habits will build or rebuild your credit!

What happens to my deposit?

Have you ever rented equipment or an apartment, they normally require a deposit to be made in case of damage or to reserve a spot. Deposits for secured credit cards work the same way, your deposit will be held as collateral for it being used until you live up to the agreement . Unlike renting equipment or an apartment, you are making timely payments on your account. Delinquent accounts will eventually lead to closure and losing your deposit.

There are two scenarios that could happen to your deposit

  1. Your deposit will be returned to you once you close your account. Your account, however, must be in good standing and have a zero balance
  2. You may eventually be able to switch your account into a regular unsecured credit card. Once that happens, your collateral is returned without requiring you to close down your account. This normally happens only after the lender determines that your risk level has lowered after making timely payments.


Kim Lee is a UNLV graduate with a degree in Biotechnology. He has natural attraction toward technology, with a passion of servicing and helping people. Finance has always been his main interest and hobby, as he likes to dwell into small business and investing ventures. He writes and shares what he learns on the way, while he tackles on a life as an entrepreneur.

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