Key Takeaways
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Secured credit cards require a cash security deposit and provide a credit limit equal to your security deposit.
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You may qualify for a secured credit card even if you don’t have a credit score.
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Secured credit cards can help you build or rebuild your credit history with responsible use.
Are you worried you won’t qualify for a new credit card? There are some valid reasons to be concerned, like if you have no credit history, limited credit, less-than-perfect credit, or you’ve recently gone through financial hardship. Do you have options? Yes. There are ways to build (or rebuild) your credit that include credit card offers.
You could still qualify for a credit card by applying for a secured credit card account. Using a secured card responsibly may help you build positive credit history.
Secured credit cards defined
A secured credit card is a card that requires a refundable cash deposit that’s equal to your credit limit—and this can be as low as $200. A standard or unsecured credit card extends a credit limit without needing a deposit or collateral.
Some secured credit card issuers will periodically review your account to see if you qualify for an unsecured card. For example with Discover, after 7 months, we begin automatic monthly account reviews to see if you qualify to upgrade to an 'unsecured' card and get your deposit back.1
Is it the best credit card for you? Every situation is different. Many people who consider applying for a secured credit card are concerned about how or when they’ll get their security deposit back. Others may wonder if a secured credit card is a real credit card that can help them build a credit history or repair bad credit.
Don’t let these misconceptions keep you from applying for a secured credit card. The truth is, secured credit cards may be a great option to help you build good credit and establish a stable financial future.
Myth 1: Your credit card security deposit is nonrefundable
Reality: The security deposit on your secured credit card is fully refundable. You can get your security deposit money back if you close your account, so long as you pay your balance in full. If you cancel your account and your balance is zero, you’ll likely get a refund. Note that the timing of receiving your refund may differ from issuer to issuer.
Myth 2: You can’t increase the credit limit on a secured credit card
Reality: Your credit limit on a secured card is a portion of your security deposit (up to 100%). Some cards allow you to increase the credit limit by providing an additional deposit.
Myth 3: You can’t afford a credit card security deposit
Reality: The security deposit for your secured card doesn’t have to be a huge amount; it just must be enough to open the account. Consider a secured card with a low minimum security deposit amount.
With the Discover It® Secured Credit Card, your credit line will equal your deposit amount, starting at $200.2 So, once you save $200 you can use it for your security deposit.
Myth 4: Credit card security deposits are bad for your savings
Reality: A secured credit card can help you build your savings by giving you a savings goal for your deposit. Plus, you may find that using a secured credit card can make it easier for you to manage your overall monthly spending and establish good financial habits.
Plus, as mentioned above, you can earn your deposit back and add to your savings.
Myth 5: A secured card isn't a “regular credit card”
Reality: Sometimes people get secured credit cards confused with prepaid cards or debit cards.
- Prepaid cards and debit cards withdraw money from a pre-existing balance of funds and don’t involve borrowing.
- Secured credit cards work the same way as unsecured credit cards by extending credit.
- Prepaid card issuers and debit card bank accounts don’t report your activity to the credit bureaus, and don’t impact your credit history or credit score.
- Secured credit card issuers report your activity to one or more credit bureaus.
Myth 6: Secured credit cards don’t help your credit score
Reality: Many people who don’t have a credit history or don’t have a credit score can establish and build a credit history by getting a secured credit card. Because it's a real credit card, a credit bureau will receive your activity from your credit card issuer. The more dependable you are with your payments, the better your credit will look in your credit report.
Did you know?
The Discover It® Secured Credit Card is a real credit card. And, since Discover reports your payment history to the three major credit bureaus it could help build your credit with responsible use.3
Myth 7: Secured cards don’t provide credit card rewards
Reality: While some secured credit cards don’t offer a rewards credit card, the Discover It® Secured Credit Card lets you earn rewards just like every other Discover credit card. You’ll earn 2% Cashback Bonus® at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter, automatically. Plus earn unlimited 1% cash back on all other purchases.4
How much will a secured credit card help your credit score?
Secured credit cards are a great option when you start your credit journey or need to make a credit repair. Because much will depend on how you manage your payment history and credit limit, there’s no exact calculation on how much it can help your credit score.
Don’t let the myths about secured credit cards hold you back. With a bit of research, you’ll see why secured credit cards can help you build a credit history and make a credit repair. If you want to establish credit for the first time or make positive changes to your credit history and credit score, applying for a secured credit card may help you manage your spending and build a stronger financial future.
