Secured Credit Cards

A secured credit card is a type of credit card for people with limited or damaged credit that requires the user to place a refundable security deposit, which the card’s issuer holds as collateral until the account is closed. The deposit for a secured card reduces the issuer’s risk and leads to higher approval odds for applicants. Plus, secured credit cards don’t need to charge the same high fees as unsecured credit cards for bad credit because issuers can keep the deposit money if something goes wrong.

Compare Secured Credit Cards

A secured credit card can help you build or rebuild your credit, just like a “normal credit card.” The one thing a secured credit card generally won’t give you is the ability to actually borrow money. Most secured credit cards are fully secured, which means your spending limit will equal your deposit amount.

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If you are denied for a secured credit card, you could apply for a different secured card (one with a higher approval rate), become an authorized user on someone else’s credit card account, or apply for a credit-builder loan. Some secured credit cards don’t even check your credit when you apply. So you will only be denied if you do not have a U.S. mailing address, a Social Security number (or Individual Taxpayer Identification Number), or enough money to fund your deposit and make monthly payments.

In general, secured credit cards are much easier to get than unsecured cards because they require a refundable deposit that also serves as your credit limit. Because there’s less risk for the issuer, secured cards are able to offer nearly guaranteed approval, even to people with damaged credit. But that doesn’t mean everyone is accepted, and some secured cards are easier to get than others.

Typically, if you’re denied for a secured credit card, the card’s issuer will send you a letter explaining why. That can be a good place to start when determining your next steps.

What to do if you’re denied for a secured credit card:

• Apply somewhere else. Just because you didn’t meet one credit card company’s requirements doesn’t necessarily mean you’re disqualified from every secured card on the market. In particular, make sure to check out credit cards with no credit check.
• Become an authorized user. If someone adds you to their account as an authorized user, you’ll get a card and be able to make charges, but the primary cardholder will be responsible for paying the bills. And if they pay on time, your credit standing will improve.
• Apply for a credit-builder loan. Many credit unions and banks offer small loans to help people build or rebuild their credit. Much like a secured card, you’ll need to make a deposit when you apply for a so-called credit-builder loan.
• Focus on your open accounts. If you have a mortgage, student loan, auto loan, or line of credit, making your payments on time will help build up your credit score. That will make it easier to get approved for a credit card.

Why was I denied for a secured credit card?

The most common reasons people are denied for a secured credit card include having a bankruptcy or tax lien on their credit report, not having enough income to meet their monthly obligations, and having an extremely low credit score. Past delinquencies with the issuing bank, current delinquencies anywhere, and invalid application information could all be reasons as well.

The specifics vary by card, though. So, if you were denied for a secured credit card, don’t lose hope. Just apply for one of the several secured cards with no credit check, and manage your account responsibly once you’re approved. You can also sign up for WalletHub’s free credit analysis for additional help getting your credit score back on track.

Yes, you can rent a car with a secured credit card. But to rent a car with a secured card, you need to have enough available credit to accommodate the hold that the rental agency will put on your card. That’s the case with any credit card, yet it’s a bigger concern with secured credit cards because the spending limit on a secured card is equal to the amount of the security deposit you put down.

When you basically have to pre-pay for all of your purchases, you’re unlikely to have as high of a spending limit as you would otherwise. So even if you have enough credit available to cover the cost of your rental, plus incidentals, renting a car with a credit card could make other purchases difficult to complete until the rental company releases the hold on your account. Using a large portion of your credit for a car rental may also increase your credit utilization, which is bad for your credit score.

There are ways to rent a car without a credit card, too. You could use a debit card or prepaid card, for example. But again, if your account doesn’t provide enough spending power, you’ll run into the same types of problems.

It’s hard to say exactly how much a secured credit card will raise your credit score, or how fast your score will improve. A good ballpark estimate is that you should see a bit of improvement after a few months and solid gains after a year, assuming you pay your bills on time. And if you start with a bad credit score, you can expect to qualify for an unsecured credit card for fair credit within 12-18 months.

But a lot depends on your starting point, particularly what types of negative records are on your credit report. How you manage both your new secured card and your other financial obligations is very important, too. Paying all your bills by the due date every month is key. Doing so will add positive information to your credit reports, helping cover up mistakes of the past. Failing to do so will only reinforce the idea that you’re a risky borrower. Your credit score will also improve faster the more available credit you have. And you can control that by submitting a larger initial security deposit or adding to it over time.

For a more accurate idea of how much a secured card will raise your credit score, check out your free personalized credit analysis from WalletHub. We’ll tell you which aspects of your credit need the most improvement, exactly what you need to do to fix them, how fast you can raise your score and which credit card will save you the most money. You can also watch your score improve with free daily credit score updates.

More than 30 banks and credit unions offer secured credit cards, including 7 of the 12 largest credit card issuers.

Here are the major banks that offer secured credit cards:

• Bank of America
• Capital One
• Citi
• Discover
• USAA (Visa and Amex)
• U.S. Bank
• Wells Fargo

A number of smaller banks and credit unions offer secured credit cards, too. They include Capital Bank, First Progress and Green Dot, among others. The major banks that do not offer secured cards are American Express, Barclaycard, Chase, PNC and Synchrony Bank.But remember, it’s not a secured credit card’s issuer that really matters. Your goal should be to find the card with the lowest possible annual fee, no matter who offers it. And you can achieve that goal by comparing secured credit cards using WalletHub's free comparison tool. You can also try our free CardAdvisor to get a personalized recommendation based on your answers to a few simple questions.

The best secured credit card with rewards is Discover it Secured because it has a $0 annual fee and offers 2% cash back on up to $1,000 spent at gas stations and restaurants every quarter. It also gives 1% back on all other purchases, and Discover matches all your cash back earned during the first year.

Another card in the running for best secured credit card with rewards is the AeroMexico Secured Visa. It’s extremely rare to see an airline card for bad credit. But this one gives a nice bonus of 3,500 miles and a companion ticket just for using the card once. Plus, you get 2 miles per $1 on gas and groceries and 1 on all other purchases.

The Best Western Secured card is yet another good secured credit card with rewards. It gives 3 points per $1 on Best Western purchases and 2 on everything else. And you get a 5,000-point bonus for making a single purchase.

Discover it Secured is the best secured credit card with rewards, all things considered. But it definitely isn’t the only card in the conversation. It’s good to weigh all your options before settling on the best card for you. By the way, all of these cards report to the credit bureaus on a monthly basis, giving you the chance to build credit with on-time payments.

Here are the best secured credit cards with rewards:

• Overall: Discover it Secured. $0 annual fee. $200 security deposit. 2% back on the first $1,000 spent on gas and dining per quarter. 1% back on everything else. First-year rewards doubled.
• Airline Miles: AeroMexico Secured Visa. $25 annual fee. $300 security deposit. 3,500 bonus miles and 1 companion ticket ($99 value) after first use. 2 miles per $1 spent on gas and groceries and 1 on other purchases. Companion ticket each account anniversary. Free checked bags on AeroMexico flights.
• Motorcycle Rewards: Harley-Davidson Secured Visa. $0 annual fee. $300 security deposit. 1 point per $1 on all purchases. 2,000 points gets you a $25 H-D gift card.
• Hotel Points: Best Western Secured Credit Card $29 annual fee. $300 deposit. 5,000 bonus points after first use. 3 points per $1 spent at Best Western. 2 points per $1 on other purchases. 10% discount at bwrcarddiscount.com.
• Military Community: Navy Federal Credit Union nRewards Secured Mastercard. $0 annual fee. $500 deposit. 1 point per $1 on all purchases.
• Small Business: Wells Fargo Business Secured Mastercard. $25 annual fee. $500 deposit. 1.5% cash back on all purchases.

There are a few factors you should consider when choosing a secured credit card. They include the annual fee, the minimum deposit requirement and whether the card offers rewards.

Paying an annual fee just to get rewards only makes sense if the amount you’ll earn exceeds both the fee and your expected earnings with a cheaper card combined. Fortunately, you don’t have to worry about that because the best secured credit card with rewards also happens not to charge an annual fee.

The best secured credit card with a low deposit is the Secured Mastercard® from Capital One because new cardholders may be able to put down either $49, $99 or $200 and still get a $200 credit line, which would make the card only partially secured. And there’s a $0 annual fee.

Other secured cards don’t have the potential to be quite as cheap, but there are a few really good options with a $200 deposit minimum. That’s still pretty low compared to the many secured cards that ask for $300-$500+.

Here are the best secured credit cards with low deposits:

• Secured Mastercard® from Capital One: $49, $99 or $200 minimum deposit ($1,000 max). $0 annual fee and $0 foreign transaction fee. $200 starting credit limit.
• Discover it® Secured: $200 minimum deposit ($2,500 max). $0 annual fee and 0% foreign transaction fee. 2% cash back on the first $1,000 spent at restaurants and gas stations per quarter. 1% back everywhere else. First year’s rewards matched.
• OpenSky® Secured Visa® Credit Card: $200 minimum deposit ($5,000 max). $35 annual fee. 3% foreign transaction fee. No credit pull when you apply.
• First Progress Platinum Prestige Mastercard® Secured Credit Card: $200 minimum deposit ($2,000 max). $49 annual fee. 3% foreign transaction fee. 9.99% (V) interest rate, and no penalty APR.

The Secured Mastercard® from Capital One doesn’t guarantee a low deposit, but it does offer the chance of one. If your credit is toward the bottom of the bad credit range, you’ll probably still have to put down a $200 deposit. But the higher your credit score is, the better chance you’ll have of being assigned a $49 or $99 deposit.

The main difference between a secured credit card and an unsecured credit card is that you’re required to place a refundable security deposit to get a secured card. The amount of this deposit typically serves as the credit limit for the secured card, which means you have to pre-pay for purchases with a secured card. You’ll usually have to put down the deposit when you apply, and you’ll get it back when you close your account or upgrade to an unsecured credit card. Unsecured credit cards, on the other hand, give access to a credit line that isn’t “secured” with a deposit.

There is no difference between secured and unsecured credit cards when it comes to building credit. All major secured cards report account information to the major credit bureaus on a monthly basis, just like unsecured cards. In fact, you can’t tell secured and unsecured cards apart on a credit report. So as long as you use either type of card responsibly, your credit score will improve.

Below, you can get a better feel for the differences and similarities between secured and unsecured credit cards by seeing how they compare in several important categories.

Secured vs. Unsecured Credit Cards: Key Differences

Approval Odds of Secured Credit Cards vs Unsecured Credit Cards

Secured credit cards are easier to get approved for than unsecured cards. Because you’re technically pre-funding your credit line with a secured credit card, you can’t spend more than you can afford to repay. The deposit is held in an account by the card issuer, so if you don’t pay your bills, the deposit is used to cover the cost. That’s why secured credit cards are able to offer nearly-guaranteed approval to people with bad credit, while charging very reasonable fees. That being said, secured credit cards are real credit cards – they have interest rates, and you have to pay your monthly bill on time.

In contrast, unsecured credit cards tend to be harder to get, because the card issuer takes on a lot more risk by extending an unsecured credit line. In other words, you can spend more on an unsecured card than you can afford to repay. There are unsecured credit cards for people of all credit levels, but if you have bad credit, you’re likely to pay high non-refundable fees for a very small line of unsecured credit.

Of course, unsecured credit cards have more potential overall and are what you want in your wallet at the end of the day. No secured credit card offers a $400+ initial bonus or a 0% APR for 12+ months. But plenty of unsecured credit cards do. It’s just that you have to prove yourself before becoming eligible for such an offer. And using a secured card is one of the most dependable ways to do that, especially if you’ve made mistakes with credit in the past.

Choosing Between Secured & Unsecured Credit Cards

Overall, the toughest decision between secured and unsecured credit cards comes when you have damaged credit. With bad credit, it’s harder to get approved for an unsecured credit card, and the unsecured options available to people with bad credit are far less attractive.

If you have limited, fair, good or excellent credit, you should be able to start with a solid unsecured card. If you’ve got bad credit and the flexibility to choose either a secured credit card or an unsecured one, always go secured. It will cost you a lot less in the long run and help you build credit just the same. You can check your credit score for free on WalletHub to see where you stand.

Partially secured credit cards have spending limits that are bigger than the refundable security deposit held by the issuer as collateral. For example, the Secured Mastercard® from Capital One can be partially secured since your deposit could be as low as $49 while your spending limit starts at $200.

With a partially secured credit card, a credit card company only has a partial guarantee that they will be repaid if the cardholder maxes out the card. That’s why it’s rare for a secured card to be partially secured from the start.

It’s more common for a secured credit card to become partially secured or unsecured after a while. This happens when the issuer gives the cardholder a credit-limit increase. Or, they may give a deposit refund as a reward for consistently paying on time.

The Secured Mastercard® from Capital One is the only card available right now that can be partially secured from the start.

Best Partially Secured Credit Card:

• The Secured Mastercard® from Capital One is the only partially secured credit card.
• All cardholders start with a $200 credit limit.
• The deposit you’re required to place could be $49, $99 or $200, depending on your creditworthiness.
• If your credit history, income and debt situation are all really bad, you’ll probably have to put down the full $200. But if you’re closer to fair credit or have limited experience, it may be partially secured.
• The Secured Mastercard® from Capital One has a $0 annual fee, regardless of what your deposit winds up being.

Don’t get too bummed out about the lack of partially secured credit card options, though. As far as credit building goes, there’s no difference between a fully secured credit card, a partially secured credit card and an unsecured credit card. The amount of your security deposit, if you have one, is not listed on your credit reports.

There are only a couple added benefits that a partially secured credit card provides relative to a fully secured card. For one thing, they offer the ability to borrow. You can’t really get a loan from a fully secured credit card because you have to fully prepay your purchases. And with a partially secured credit card, you get to keep more of your money out of the credit card company’s custody.

There is no Chase secured credit card available right now. In fact, there’s never been a secured credit card from Chase. Chase offers unsecured credit cards for people with at least good credit.

Although there is no Chase secured credit card, the same cannot be said for many of Chase’s competitors. Capital One, Citi, Discover and Wells Fargo are just some of the major banks that offer secured credit cards.  

Secured Credit Card Options & Info

• Good for low deposits: Secured Mastercard® from Capital One has a $0 annual fee. It requires a deposit of $49, $99 or $200, based on your credit history. But you always start with a $200 credit limit.
• Easiest approval: OpenSky® Secured Visa® Credit Card has no credit check. It charges a $35 annual fee and requires a $200 deposit.
• Best cash back rewards: Discover it® Secured card has a $0 annual fee and 1 - 2% cash back on purchases: 2% cash back on up to $1,000 spent at restaurants and gas stations each quarter (1% everywhere else). And Discover matches your first year’s rewards. Requires a $200 deposit.

So, even though you’re not able to get a Chase secured credit card, you still have plenty of options. And they’ll all help you start building your credit, plus save some money. Once you get your credit score to “good”, you can start thinking about applying for a Chase credit card.