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Not financial advice: this is general education. Your situation is different, so read every product's full terms and consider free help from a nonprofit credit counselor before taking on new credit.
How a secured card works
With a secured card you pay a cash security deposit when you open the account, and your credit limit is usually equal to that deposit. You then use it like a normal credit card. If you don't pay, the issuer can keep the deposit. When you close the account in good standing, or the issuer upgrades you, the deposit is refunded.
The deposit isn't a payment toward your bill. You still have to pay at least the minimum each month, and interest applies to balances you carry.
Why it builds credit
Most secured cards report to the credit bureaus just like unsecured cards, so on-time payments and low balances build your history. Before applying, confirm the card reports to all three bureaus: Equifax, Experian and TransUnion.
What to compare
- Minimum deposit: often a few hundred dollars; some issuers accept less for qualified applicants.
- Annual fee: many secured cards charge none.
- APR: often high. It only matters if you carry a balance, so aim to pay in full.
- Graduation: some issuers review accounts and can upgrade you to an unsecured card and return your deposit.
- Credit check: some don't do a hard pull; most do.
How to use it well
- Put one small recurring bill on it, such as a streaming subscription.
- Set up autopay for the full statement balance.
- Keep the balance that reports on your statement low. See utilization explained.
- Check your reports after a few months to confirm it's reporting.
Secured cards vs car-secured cards
A newer variation, Yendo, secures the card with your car instead of a deposit. It can mean a higher limit without tying up cash, but missed payments put your vehicle at risk. See Yendo vs a regular secured card.
Official guide: CFPB: secured credit cards.
More guides
- Thin or No Credit File? How to Start Building Credit
- How Credit-Builder Loans Work (and When They Make Sense)
- Credit Utilization Explained: The 30% Rule and What Really Matters
- How to Check Your Credit Report for Free on AnnualCreditReport.com
- Yendo Credit Card Review: A Card Secured by Your Car
- Yendo vs a Regular Secured Credit Card: Which Fits You?