What Are Secured Credit Cards and How Do They Work?

Learn how secured credit cards work and how they can help you build your credit with responsible use


There are plenty of credit card options out there. But not all of them are available if you don’t have an established credit history—or if your credit is less than perfect. There are still options, though. One could be a secured credit card.

Secured credit cards can be a great tool to help you build good credit. But before applying, it may help to learn a little about how secured cards work. Keep reading to learn more about what it takes to get a secured card, how it’s different from other cards and a few potential benefits.

What Is a Secured Credit Card?

When a credit card is “secured,” it means money must be deposited with the credit card issuer in order to open an account. That money is known as a security deposit. And it’s held by the credit card issuer while the account is open, similar to the security deposit given to a landlord to rent an apartment.

A secured credit card can be a great option for people who are establishing, building or rebuilding their credit. And building credit through responsible use can make you a better candidate for things like mortgages, car loans and other credit cards.

How Do Secured Credit Cards Work? 

Secured cards work differently depending on which credit card company issues them. But here’s how getting and using a secured card could work if you decide one’s right for you:

1. Applying for a Secured Card

As with any credit card, getting approved for a secured card isn’t guaranteed. Each credit card company has its own policies and secured credit card requirements. Aside from a security deposit, there may be additional approval requirements. 

It may help to learn more about how to apply for a credit card. You could also check whether you’re pre-approved for a Capital One card. It’s quick and secure—and checking won’t hurt your credit score.

2. Making Your Deposit

The amount you pay as a security deposit can vary. A security deposit may be the same amount as your line of credit. For example, a $200 deposit might give you a $200 credit limit. 

Some cards provide a credit line higher than the amount of the security deposit, based on your credit history. Capital One’s secured card could require only a $49 or $99 security deposit for an initial $200 credit line. Plus, if you deposit more money before your account opens, you may be able to get a higher limit.

Some card issuers allow you to fund your deposit over a period of time. Others may require that it all be paid upfront.

3. Using Your Secured Card

Once you’ve been approved for a secured credit card and made your deposit, you can use the card to make purchases in person or online—just like a traditional, unsecured credit card. Many secured cards look like traditional cards. So chances are no one but you will know you’re using a secured card.

Part of using a secured card is keeping track of spending and paying your statement on time every month. Reading up on how statement balances and payment options work can help prepare you to keep up with your monthly bills.

4. Getting Your Deposit Back

Deposits are usually refundable. But credit card issuers each have their own policies about when and how refunds are given.

Capital One refunds security deposits in two ways: You can earn back your deposit as a statement credit by using your card responsibly. Or it will be refunded when you close your account and pay your balance in full.

Potential Benefits of Secured Credit Cards

There are plenty of advantages to using secured cards: A secured card can give you experience using a credit card, help you improve your credit profile and help you work toward a card with better rewards or a higher credit limit. 

It may help to think of a secured card like on-the-job training you can use to move on to bigger and better opportunities. 

Use a Secured Card to Build Credit

If you’re looking to build or rebuild your credit, you can use a secured card to help yourself build a successful track record. That means doing things like paying at least the minimum payment on time each month and using your card responsibly.

Keep in mind that missed or late payments could harm your credit. And so could exceeding your credit limit.

Another fact to consider: Some issuers may not report the status of secured cards. If better credit is your goal, look for a secured card that reports to at least one of the three major credit bureaus: Experian®, Equifax® and TransUnion®.

Secured Cards Can Help You Graduate to Traditional, Unsecured Cards

There’s no single right time to move from a secured card to an unsecured card. When and why you decide to apply for a traditional credit card will depend on your situation and goals. 

But some credit card companies may allow you to move seamlessly from a secured card to a traditional card without closing your original line of credit. The process may even involve returning your deposit.

Check with your credit card company to understand what’s possible and how your account will be treated if you transition to a traditional card. And be sure to understand how closing your secured card account could affect your credit.

Secured Cards vs. Unsecured Credit Cards, Debit Cards and Prepaid Cards

When you pay for something, secured cards and other cards may seem the same. But there are some differences worth noting.

What’s the Difference Between Secured Cards and Unsecured Cards?

Secured cards and unsecured credit cards work similarly. The biggest difference between a secured and unsecured credit card is the security deposit. But rewards like cash back, miles or points may also be limited with secured cards.

Credit limits may differ, too. With a secured card, your credit limit may be based on the security deposit. But some secured cards offer opportunities to increase your credit limit. At Capital One, you could be automatically considered for a higher credit line in as little as six months.

What’s the Difference Between Secured Cards, Prepaid Cards and Debit Cards?

One big difference is that debit and prepaid cards may not be able to help you build credit. That’s because activity on those accounts isn’t usually reported to credit bureaus, according to the Consumer Financial Protection Bureau. Prepaid cards may also lack many of the security features of a credit or debit card.

Another primary difference between secured cards, debit cards and prepaid cards is where the funds used to pay for things come from. Prepaid cards are usually loaded with money ahead of time, and a debit card is usually linked to a checking account. But a secured card functions differently: The credit card company provides funding that you then pay back each month.

Tips for Using Secured Credit Cards

When it comes to using secured cards, tips are much the same as those for any revolving credit account. Here are a few you can use to help set yourself up for success: 

  • Deposits: Make sure you’re able to fully fund your deposit within the time frame required by the card issuer. If you don’t fund the deposit in time, there’s a chance the lender may close your account.
  • Expenses: Keep an eye on your spending. Your credit card may be declined if you exceed your credit limit. And if you’re paying interest, you could end up owing more than your initial deposit.
  • Budgets: If you use the card only for a few fixed purchases a month, it may be easier to avoid going over your limit. And that could help you get used to using a credit card. 
  • Payments: Consider your monthly payment. If you pay your statement balance in full every month, you may be able to avoid interest and other fees.

If you’ve never had a credit card before, have a damaged credit history or want to improve your credit score, a secured card might be the way to go. Secured cards are also one option for college students who are new to credit.

Remember, building good credit takes time. But choosing a card like the Capital One Platinum Secured card could help you take steps toward an even brighter financial future.


Learn more about Capital One’s response to COVID-19 and resources available to customers. For information about COVID-19, head over to the Centers for Disease Control and Prevention

Government and private relief efforts vary by location and may have changed since this article was published. Consult a financial adviser or the relevant government agencies and private lenders for the most current information.

We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.

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