Why secured credit cards

These agencies gather the data that make up your credit history report and ultimately determine your credit score. Using your secured credit card responsibly can have a positive impact on your credit over time. Adopt these good habits to help improve your credit health:. A secured credit card is meant to be temporary — a bridge between having no credit card at all and qualifying for an unsecured card. How long that journey takes depends on your credit profile and how responsibly you use your secured credit card and manage other factors that go into your credit report and score.

When you do qualify for an unsecured card, you can leave your secured credit card behind and have your security deposit returned to you. Unsecured cards require no deposit and may offer higher credit limits, lower interest rates, better terms, and rewards programs. Keep in mind when looking to close your secured credit card account, however, that closing accounts and lowering your available credit may lower your credit score.

Many institutions offer unsecured cards, so upgrading your card may be as simple as requesting the change when you qualify. As with any credit card, make sure your unsecured card fits your needs and spending habits. Ready to apply for a secured credit card? For access to additional financial education resources, for wherever you are on your financial journey, visit our Financial Education Center.

This article is for informational purposes only. It is not designed or intended to provide financial, tax, legal, investment, accounting, or other professional advice since such advice always requires consideration of individual circumstances. Please consult with the professionals of your choice to discuss your situation. It is not intended to be an offer or solicitation for a product or service and is not an offer to extend credit.

All examples are for illustrative purposes only. If you are interested in sending this page to a friend or relative, please enter the following:. Check out these five big benefits that come with a secured credit card: 1.

Your credit limit is tied to your security deposit As the name may imply, secured credit cards are secured by a cash deposit held in a collateral account.

A secured credit card is nearly identical to an unsecured credit card, but you're required to make a minimum deposit known as a security deposit , to receive a credit limit.

Secured cards are often marketed toward people looking to build or rebuild their credit. As a result, the security deposit acts as collateral if you default on payments, but it's completely refundable if you upgrade to an unsecured card or pay off your balance in full and close your account. Starting at eight months from account opening, Discover will automatically review your credit card account to see if they can transition you to an unsecured line of credit and return your deposit.

This takes the guesswork out of wondering when you'll qualify for an unsecured credit card. After you make the minimum security deposit, you can start using your secured card just like any other credit card.

You can spend up to your credit limit, which is often equal to your security deposit. If you want more spending power, you'll need to deposit more money.

You will incur interest charges if you carry a balance month to month, so make sure you pay your bill in full and on time, which also helps your credit score. Actions you take with a secured card are reported to the three main credit bureaus Experian, Equifax and TransUnion , so it's crucial to avoid maxing out your card and paying off your balance each month.

Trying to decide between a secured or unsecured card? Your credit score might play a big role in your decision-making. If you have less-than-stellar credit, a secured credit card may be the better option since they're typically easier to qualify for with poor credit scores below or no credit.

If your credit is already good or excellent scores and greater , an unsecured card can provide you with better benefits that may earn you rewards in common spending categories, such as dining , gas and groceries , Global Entry or TSA PreCheck credit and added entertainment perks. Sign in Register. Browse categories. Regular purchase APR. Annual fee. No credit check necessary to apply.

OpenSky believes in giving an opportunity to everyone. Show more. Unlike a debit card, it helps build your credit history with monthly reporting to all 3 major credit bureaus. Once available, you will also have free access to your FICO score online. No annual or hidden fees. See if you're approved in seconds. Building your credit? Using the Capital One Platinum Secured card responsibly could help.

No Annual Fee, earn cash back, and build your credit with responsible use.