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The best secured credit cards are tailored to help you on your credit-building journey, with features to minimize the cost of maintaining the card, like a low or non-existent annual fee and a low annual percentage rate (APR). Importantly, top-tier secured cards have a robust reporting policy to credit bureaus, ensuring that your consistent payments are regularly recorded and contribute to boosting your credit score. While some secured cards come with rewards, those are an extra perk rather than a key factor to consider. The best secured card for you is going to help you build strong financial habits, demonstrate your creditworthiness and allow a smooth transition to an unsecured card when the time is right.
Why You Can Trust Our List
Best Secured Credit Cards
Navigating the world of secured credit cards can be challenging, but certain options stand out above the rest. Here, we've compiled a list of some of the best secured credit cards available on the market. These selections have competitive APRs, reasonable fees, credit-building potential, and extra features, all designed to aid in your financial journey.
- Secured Chime Credit Builder Visa® Credit Card
Unique credit-building card with no annual fee or interest
- UnspecifiedAPR
- $200Min. Security Deposit
- $0Annual Fee
- None–PoorRecommended Credit
- Navy Federal Credit Union® nRewards® Secured Credit Card
A good secured card for building credit and earning rewards
- 18% VariableAPR
- $200Min. Security Deposit
- $0Annual Fee
- None–PoorRecommended Credit
- Capital One Platinum Secured Credit Card
Best secured card for low deposit and potentially high credit limit
- 30.49% VariableAPR
- $49Min. Security Deposit
- $0Annual Fee
- Limited – BadRecommended Credit
- Discover it® Secured Credit Card
A good no-annual-fee secured card for earning cash back and building/rebuilding credit
- 28.24% VariableAPR
- $200Min. Security Deposit
- $0Annual Fee
- Limited–PoorRecommended Credit
- OpenSky® Secured Visa® Credit Card
Great secured card with no credit check
- 22.64% (Variable)APR
- $200Min. Security Deposit
- $35Annual Fee
- None–FairRecommended Credit
- Merrick Bank Double Your Line® Secured Credit Card
Best credit card for training good financial habits
- 22.45% VariableAPR
- $200Min. Security Deposit
- $36*Annual Fee
- PoorRecommended Credit
- Capital One Quicksilver Secured Cash Rewards Credit Card
Straightforward secured credit card with rewards
- 30.49% VariableAPR
- $200Min. Security Deposit
- $0Annual Fee
- Limited – PoorRecommended Credit
What Is a Secured Credit Card?
A secured credit card is a type of credit card that's specifically designed for individuals who are either new to credit or trying to rebuild their credit. Unlike a traditional, or unsecured, credit card, a secured card requires the cardholder to provide a cash deposit as collateral. This deposit is typically equal to the initial credit limit of the card. For instance, if you want a credit limit of $500, you would need to provide a deposit of $500. This security deposit helps to mitigate the risk posed to the issuer, as it can be used to cover your debt if you default on your payments.
The secured credit card functions like a regular credit card in most other ways. You can make purchases up to your credit limit, and you're required to make at least the minimum payment each month by the due date. The issuer reports your payment history to the credit bureaus, which can help build your credit score over time if you make your payments consistently and on time. Many secured cards also offer the opportunity to upgrade to an unsecured card after a period of responsible use, returning your initial deposit and extending you credit based solely on your creditworthiness.
The Difference Between a Secured and Unsecured Credit Card
- Security Deposit: Secured cards require a cash deposit that serves as collateral, while unsecured cards do not.
- Credit Limit: For secured cards, the credit limit is typically equal to the deposit amount. Unsecured cards' credit limits are determined based on factors like income, credit history, and creditworthiness.
- Accessibility: Secured cards are generally more accessible to those with poor credit or no credit history, while unsecured cards usually require a good to excellent credit score.
- Upgrading: Many secured cards offer the opportunity to upgrade to an unsecured card after a period of responsible use. Unsecured cards do not have this feature as they're already in the 'unsecured' category.
- Interest and Fees: Both secured and unsecured cards charge interest on balances carried from month to month, and may have additional fees such as annual fees or late payment fees. However, secured cards sometimes have higher fees and interest rates due to the higher risk associated with lending to individuals with poor or no credit.
Benefits of Secured Credit Cards
Building Credit
Secured cards can help individuals establish or rebuild credit through responsible use. Issuers report to the major credit bureaus, allowing you to build a credit history over time.
Accessibility
Secured cards are often more accessible to individuals with no credit history or poor credit scores, as the deposit reduces the risk for the card issuer.
Upgrade Potential
Many card issuers provide the opportunity to upgrade to an unsecured card after a period of responsible use, allowing you to get your deposit back.
Controlled Spending
With a credit limit typically equal to your deposit, secured cards can help encourage responsible spending and prevent you from accruing unmanageable debt.
Drawbacks of Secured Credit Cards
Security Deposit
The requirement of a cash deposit up front can be a barrier for some individuals, particularly those with limited funds.
Lower Credit Limits
Credit limits are generally lower on secured cards than on unsecured cards, which can be limiting if you need to make larger purchases.
Higher Costs
Secured cards often have higher interest rates and fees compared to unsecured cards, making them potentially more expensive if you carry a balance or miss a payment.
Impact on Credit Utilization
Since secured cards usually have lower credit limits, it's easier to have a high credit utilization ratio, which can negatively impact your credit score.
How Does a Secured Credit Card Work?
Once you've been approved for the card, you'll likely need to provide a cash security deposit. This deposit not only serves as collateral for the card issuer but also typically determines your credit limit. You can generally start using your secured credit card right away (although you may need to wait for the actual card to arrive in the mail). Just like a traditional credit card, you can make purchases up to your credit limit, although it's generally advise to keep your spending below 30% of your total limit to keep your credit utilization low.
Next, comes the responsibility of managing your spending and payments. Every month, you're required to pay off your balance or, at a minimum, make your monthly payments on time. This is crucial to avoid late fees and damaging impacts on your credit score. It's important to note that, despite the upfront deposit, secured cards still charge interest on any balance carried over from month to month, mirroring the practices of unsecured cards.
Throughout this process, your card issuer should report your payment history to the three major credit bureaus (make sure to check that the card you apply for does report to the bureaus, or using it won't actually help improve your credit score). With consistent, on-time payments and a healthy credit utilization, your credit score can gradually improve over time.
After a period of responsible card use, many issuers will permit an upgrade to an unsecured card. At this stage, your initial security deposit will be returned to you, signifying a significant step forward in your credit journey.
Is a Secured Credit Card Worth It?
Whether a secured card is worth it largely depends on your individual circumstances and financial goals. If you're new to credit or looking to rebuild a damaged credit score, a secured card can be a valuable tool. It provides an opportunity to demonstrate responsible credit use and build a positive payment history, which are key factors in improving your credit score. Furthermore, many secured cards offer the potential to upgrade to an unsecured card after a period of responsible use. However, it's essential to consider the costs, as secured cards often come with higher interest rates and fees than unsecured cards. Also, remember that the required security deposit could tie up your funds. It's important to weigh these factors and possibly seek financial advice before deciding if a secured card is the right choice for you.
Who Should Get a Secured Credit Card?
- New Credit Users: Individuals who are new to credit and have not yet established a credit history could benefit from a secured credit card. It can be a stepping stone to understanding credit usage and building a positive credit history.
- Credit Rebuilders: Those who have had financial missteps in the past, leading to poor credit, may find secured cards a helpful tool. By making consistent, on-time payments, they can gradually rebuild their credit score.
- People With Limited Access to Unsecured Credit: Individuals who do not qualify for unsecured cards due to low income, lack of a stable job, or other factors might consider secured cards as an alternative. They provide a means to access credit and potentially improve their financial situation over time.
Who Shouldn't Get a Secured Credit Card?
- Heavy Spenders: Those who struggle with managing their spending might find they quickly max out the lower credit limit of a secured card, which can negatively affect their credit utilization ratio. Moreover, if they carry that balance from month to month, the typically higher interest rates on secured cards may lead to substantial debt.
- Cash-Strapped Individuals: If you're struggling financially and has limited cash reserves, tying up funds in a security deposit might not be the best choice. It's crucial to have an emergency fund and manage existing finances responsibly before considering a secured credit card.
- People With Good Credit: If you have a fair credit score and a solid credit history, you'll have access to better options, like unsecured cards with lower interest rates, higher credit limits, and rewards programs.
MONEYGEEK EXPERT TIP
Remember that the goal is to eventually not need a secured credit card. Ideally, once you’ve made a series of on-time payments and have proven you can manage debt responsibly, you’ll apply and be approved for an unsecured credit card. That will give you more financial flexibility — and enable you to cancel your secured card and get your deposit back.
How to Use a Secured Credit Card to Build Credit
Improving your credit score is a long-term effort that requires persistence and responsible personal financial skills. If you're starting with a secured credit card, here are some key steps to effectively use it as a tool to improve your credit score:
Pay on Time and In Full
Make sure you pay your bill on time every month and, if possible, pay your balance in full. This not only saves money on unnecessary interest but also helps establish good credit habits.. Payment history is the most significant factor in your credit score, accounting for 35% of your FICO score. Late payments can significantly damage your credit, so set up reminders or automatic payments if necessary.
Keep Credit Utilization Low
Try to use no more than 30% of your available credit limit at any time. High credit utilization can signal to lenders that you're at a higher risk of default, which can negatively impact your credit score.
Monitor Your Credit Score
Regularly check your credit report and credit score to track your progress and catch any errors. You're entitled to a free report from each of the three major credit bureaus once every year through AnnualCreditReport.com.
Upgrade When Ready
After a period of responsible use, ask your card issuer if you can upgrade to an unsecured card. This could lead to a higher credit limit and better terms, as well as the return of your initial deposit.
Don't Close the Card
Keep the card open even if you're not using it or have upgraded to an unsecured card. The length of your credit history contributes to your credit score. That said, if there is an annual fee for your secured card, it may be better to close it to avoid the additional cost.
Alternatives to a Secured Credit Card
Alternatives
Unsecured Credit Cards
Credit-Builder Loans
Authorized User Status
Student Credit Cards
Store Credit Cards
Personal Loans
Unsecured Credit Cards for Bad Credit: Credit cards for bad credit are designed specifically for individuals with poor credit. They typically have higher interest rates and fees than standard unsecured cards, but they don't require a security deposit.
Credit-Builder Loans: These are loans typically offered by credit unions and some banks to help individuals build credit. The lender holds the funds in an account as you make payments towards the loan, and your payment history is reported to the credit bureaus.
Authorized User Status: Being added as an authorized user on someone else's credit card can help you build credit. The account history can be reported on your credit report, which can positively impact your credit if the account is managed well.
Student Credit Cards: If you're a student, you might qualify for a student credit card. These cards often have lower credit limits and interest rates, and they're designed to help students build credit.
Store Credit Cards: These cards are often easier to qualify for than standard unsecured cards. They typically have high interest rates and can only be used at specific retailers, but they can help build credit if used responsibly.
Personal Loans: If you qualify, a small personal loan repaid over time can also help build your credit history.
Common Questions About Secured Credit Cards
Secured credit cards can be a powerful tool for building or rebuilding credit, but they often come with questions. Whether you're new to the world of secured cards or looking for deeper insights into how they work, our FAQs section is designed to clear up any confusion and provide the knowledge you need to navigate this choice with confidence.
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*Rates, fees or bonuses may vary or include specific stipulations. The content on this page is accurate as of the posting/last updated date; however, some of the offers mentioned may have expired. We recommend visiting the card issuer’s website for the most up-to-date information available.
Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone and have not been reviewed, endorsed or approved by any bank, credit card issuer, hotel, airline, or other entity. Learn more about our editorial policies and expert editorial team.
Advertiser Disclosure: MoneyGeek has partnered with CardRatings.com and CreditCards.com for our coverage of credit card products. MoneyGeek, CardRatings and CreditCards.com may receive a commission from card issuers. To ensure thorough comparisons and reviews, MoneyGeek features products from both paid partners and unaffiliated card issuers that are not paid partners.
Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone and have not been reviewed, endorsed or approved by any bank, credit card issuer, hotel, airline, or other entity. Learn more about our editorial policies and expert editorial team.
Advertiser Disclosure: MoneyGeek has partnered with CardRatings.com and CreditCards.com for our coverage of credit card products. MoneyGeek, CardRatings and CreditCards.com may receive a commission from card issuers. To ensure thorough comparisons and reviews, MoneyGeek features products from both paid partners and unaffiliated card issuers that are not paid partners.