What is a secure credit card and how does it help repair your credit score?


Basically just what the title asked

In: Economics

It’s a card that’s backed by your own money and then you graciously get to pay a fee and interest on top of that.

There are better ways to rebuild your credit. Avoid fees and high interest rates as a general rule.


A secured credit card is like a regular credit card, except it’s *secured* by a cash deposit you pay upfront. So, if you miss a payment, the company can recuperate some of the money through keeping your deposit.

By itself it doesn’t magically repair a credit score. It’s just designed for people who have bad credit scores, because the credit card company gets *some* money if you’re not able to pay it off or not using it responsibly.

Otherwise it’s just like a regular credit card – using it responsibly (doesn’t even have to be frequently, just using it for a bill or two per month and then paying it off) can help you build a good credit history.

It’s a credit card with a line of credit backed by a opening deposit. For example, if you make a $1000 opening deposit the bank will then grant you a credit card with a $1000 credit limit.

Because you’re essentially borrowing your own money instead of the bank’s, banks are more willing to offer such a card to those with no/poor credit history since there’s very little risk. As the customer pays back the secured card satisfactorily over time, the bank may opt to return the opening deposit converting the account to a normal credit card

* A secured card means that you give the credit card company something of value that they will keep if you don’t pay off your debt with them.
* Most of the time that “thing of value” is money.
* Most people don’t need secured cards because they have “good credit” and the credit card company thinks it stands a good chance of getting their money back from you.
* But people with bad credit can’t get those regular cards because the credit card company things there is too high a risk they won’t get their money back.
* So instead they offer a secured card.
* They take a deposit and then you use the card as normal.
* Every time you make a payment on time, it gets noted on your credit report.
* Slowly you can demonstrate that you actually are not a high risk and that eventually you can get regular credit again.

A secured credit card is a card you prepay for with cash. If your credit is bad then you will unlikely get a credit card. Just a reminder that a credit card works by having you buy something now and pay for it later. Technically if you don’t pay then there are serious problems which will hurt your credit.

A secured credit card means you put cash in first and you’re issued the card for that amount. So it’s more like a debit card where you really paid for the full balance already and the organization giving you the card is guaranteed to not lose money since you paid up front.

However, unlike debit cards, secured credit cards count as you having a credit card and paying off your balances without issues. A good part of repairing your credit is to have a good history of using credit and pay your bills in full. Since you can’t really get rejected for a secured credit card, this means you’ll have a card you can use and this gives you a quick way of repairing your credit.

You’re better off trying to go through your bank. They typically have credit cards with smaller limits to them to help establish credit.

You pay a deposit to the credit card issuer, then they extend you credit for the same amount. For example, you pay $500 deposit, and then get a $500 credit limit. This gives you a chance to use the card and show you can do so responsibly by making payments on time, etc. but it also protects the issuer because you cannot spend more than the amount of money of yours they hold as deposit — if you ran up $500 and tried to bail on the charges, they have your $500.

But using it correctly is a way to establish your credit worthiness and build your credit score, so that you eventually don’t need to have your credit secured and can get larger credit limits, get car loans, home mortgages, etc.