All about secured cards and their security deposits

If you’ve ever assembled a bookshelf or added a trendy backsplash to your kitchen, you’re familiar with the “do it yourself,” or DIY, method. Typically, you use your own time and tools—and maybe a set of instructions—to get the project done.

When it comes to building credit, you might think of it like a DIY project. And a secured card—when used responsibly—could be just the tool you need. Once you understand how a secured card and its security deposit work, you can start laying the foundation for great credit.

You may know that you need to provide a security deposit to the card issuer in order to open a secured card after applying. Think of it like the security deposit given to a landlord to rent an apartment—it’s held by the credit card issuer while the account is open.

The terms and amount you put down as a security deposit can vary. And the security deposit doesn’t cover your monthly payments for credit card charges—it simply allows you to open your account. 

Here’s how it works with two Capital One cards.

The Capital One Platinum Secured card might be helpful for people who are building or rebuilding credit. The initial security deposit of $49, $99 or $200—depending on your credit history—can open the account with a credit line of $200. With no annual fees or hidden fees, you can focus on building your credit—not extra charges. View important rates and disclosures.

If you’re approved, the card offers tools, such as flexible due dates, to help you on your credit-building journey.

The Capital One Quicksilver Secured Rewards card functions a lot like the Platinum Secured card, but it comes with cash back rewards. With a $200 deposit and no annual fees or hidden fees, you can open a credit line of $200 and earn 1.5% cash back on every purchase. View important rates and disclosures. You can then redeem your rewards for cash, gift cards or to cover recent purchases. The card is designed for people with fair credit or who have limited credit history.

A secured credit card can be a great option for people who are establishing, building or rebuilding their credit. It’s a good idea to pay your credit card balance in full each month instead of carrying a balance. And by practicing healthy credit habits like making on-time payments and maintaining a low credit utilization ratio, you can build a successful track record. Practicing and perfecting these habits with a secured card may help build your credit. 

And eventually, you could earn your deposit back and upgrade to an unsecured card.

Your secured card issuer might report your credit habits to the credit bureaus for your credit reports. Capital One reports your credit standing to the three major credit bureaus—Experian®, Equifax® and TransUnion®. Over time, a history of good credit standing can help build your credit.

You may only be able to increase your credit line at certain times, like before you activate your card. Depending on the card and the issuer, you might be able to increase your credit line by depositing more than the minimum amount as your security deposit, up to a certain amount.

Another opportunity to increase your credit line might come from the card issuer. With a secured card from Capital One, you could be considered for a credit line increase in as little as six months.

There are typically two ways to get your security deposit back. First, you can earn your deposit back if your card issuer upgrades you to an unsecured card after you’ve used your secured card responsibly. Or your deposit will be refunded if you close your account and pay off your full balance and your account is in good standing.

If you’re upgraded to a Capital One unsecured card, you’ll receive your security deposit back in the form of a statement credit. That credit is automatically applied to any balance on your card.

You can start building your credit by opening a secured card. With the right tools and responsible use, it won’t be long before you cross this DIY project off your list.