How Secured Credit Cards Really Work

What Is a Secured Credit Card?

A secured card is a credit card backed by a refundable security deposit. The deposit reduces the lender’s risk, which makes approval easier for people with limited or damaged credit history.

The card works like a normal credit card — payments are reported to credit bureaus, and responsible use helps build a positive payment history.

How the Security Deposit Works

The deposit is usually equal to your credit limit (e.g., a $300 deposit gives a $300 limit). It is not used to pay your bill. You must still pay your monthly statement just like with any other credit card.

Deposits are typically refunded when you close the account in good standing or upgrade to an unsecured card.

Upgrade Path: Secured → Unsecured

Many issuers review secured-card accounts every 6–12 months. If your credit score, payment history and overall profile improve, the card may upgrade automatically to an unsecured card.

When this happens, your deposit is refunded and your limit may be increased. Some issuers keep the same card number; others replace the card entirely.

Risks, Fees and What to Watch Out For

Secured cards can include annual fees, monthly maintenance fees or low starting limits. Avoid cards that charge setup fees or require non-refundable charges.

Make sure the issuer reports to all major credit bureaus — this is essential for rebuilding credit effectively.

Explore Related Credit-Building Topics

Part of The CreditCard Collection

SecuredCard.Creditcard is part of The CreditCard Collection — a network of educational minisites by ronarn AS. Each explains a different part of the credit-card ecosystem in clear language.

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Use SecuredCard.Creditcard to understand the mechanics — then explore the comparison hub to find cards suited for building or rebuilding credit.