How does a security deposit on a credit card work? This question is about Secured Credit Cards

How does a security deposit on a credit card work?

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This question is about Secured Credit Cards

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@WalletHub • 01/12/17 This answer was first published on 01/12/17. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

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A security deposit on a credit card protects the card’s issuer by preventing the user from spending more than he or she can afford to pay back. Since the amount of a credit card’s security deposit usually acts as its credit limit, placing a deposit basically amounts to pre-paying your purchases. This reduces the issuer’s risk and prevents the need for high fees. And given that a credit card’s security deposit is fully refundable, minus any outstanding balances, placing one is usually preferable to paying an annual-, monthly- or application-processing fee. For more information, check out WalletHub’s secured credit card guide: https://wallethub.com/edu/secured-cards/19575/.

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