How to Get a Secured Credit Card

Steps to Finding and Applying for a Secured Credit Card

An approved credit card application
•••

Courtney Keating / E+ / Getty Images

If you're having trouble getting approved for a regular credit card, a secured credit card is a good alternative. A secured credit card is similar to a regular credit card—you make purchases on your card, receive monthly statements, and make payments until you've paid off your balance. The difference with a secured credit card is that you make a security deposit as collateral for the credit limit.

Because you’re backing your credit limit with cash collateral, secured credit card issuers are less picky about your credit history. Those with bad credit or limited credit history are much more likely to get approved for a secured credit card than a regular credit card. Here are the steps you should take to get a secured credit card.

Explore Your Options for Secured Credit Cards

There are dozens of secured credit cards on the market, which gives you a good selection to choose from. Many major credit card issuers offer at least one secured credit card alongside their standard credit cards. Not all secured credit cards are created equally, so it's important to shop around and pay attention to the terms to ensure that you get the card that best fits your needs.

Some secured credit cards convert to an unsecured one after several months of on-time payments. As you shop for secured credit cards, keep the company's regular credit card offerings in mind—you may qualify for them after proving you can be responsible with your secured card.

The best secured cards have a low interest rate, low or no annual fees, and they report to the major credit bureaus each month. Since many people choose a secured credit card because of poor credit scores, credit reporting is a key aspect of a secured card. Your credit usage and payment history help you improve your credit history, allowing you to qualify for better credit cards in the future, but your credit score will only improve if your bank is reporting to major credit bureaus. Keep in mind that if you fail to make payments on your secured card, your credit score could suffer.

As with unsecured credit cards, secured cards may offer rewards for certain types of purchases. Note your spending habits as you shop, and see if you can get a card that offers rewards for the purchases you make most often.

Calculate the Security Deposit and Other Fees

The security deposit you pay will depend on the credit limit you're offered, which will in turn depend on your credit score and savings. In general, you can expect a security deposit of a few hundred dollars. The Capital One Secured MasterCard is arguably one of the best secured credit cards, especially for those concerned with security deposit amounts. If you qualify, you can pay a security deposit for as low as $49 for a credit limit of $200.

If you don't already have the funds for a security deposit in the bank, save what you need by setting aside money each month. You'll typically have to make the full security deposit within a few days of being approved, so wait until you have your entire security deposit saved up before you apply.

As you save for the security deposit, take a close look at the card's fine print for any fees that come with using the card. All credit cards can come with annual fees or other charges, even unsecured cards, but secured credit cards are more likely to come with high fees. That said, you can find secured cards without fees, as well.

Complete the Application

The application process will require your personal information, including info for a bank account that can be tied to the card. It's best to have all your personal information on hand before starting the application process.

Once you're approved, the issuer will give you instructions for making your security deposit. You can typically make your deposit online, over the phone, or by mail. Phone or online deposits will process faster, allowing you to get your card faster than if you have to mail a check or money order. Once the issuer receives and processes your security deposit, you'll get your new credit card in the mail.

While credit requirements are more lenient for secured credit cards, you can be denied for some secured credit cards depending on your credit history. For example, you can be denied if you’ve been out of bankruptcy for less than a year, or if you already have a negative history with the issuing bank on another account. If you’re denied, the card issuer must mail a letter explaining why you were denied. The letter will also tell you how you can access a free copy of the credit report used in the decision.

If you're denied a secured credit card, you can take other steps to improve your credit, then reapply for the card. Other options include getting added as an authorized user to a friend or family member's credit card account. You could also try applying for a different secured card.

Moving From Secured to Unsecured Credit

Some secured credit cards will automatically convert to an unsecured card after you prove you are managing your card well for a set timeframe. That means making all your payments on time and keeping your balance below the credit limit. Discover's secured credit card offers this service. Discover will begin automatically reviewing your account on a monthly basis after the first eight months, and if you've displayed good enough credit habits, it will convert your secured card into an unsecured card and refund your security deposit.

If your card doesn’t convert automatically, you can try applying for a regular credit card after a year or so. There’s a good chance you’ll get approved if you’ve handled your secured credit card responsibly. For example, TD Bank encourages secured cardholders to apply for an unsecured card after keeping their secured account in good standing for 24 consecutive months.

Article Sources

  1. Discover Financial Services. "What Is a Secured Credit Card?" Accessed May 23, 2020.

  2. Experian. "How to Build Credit." Accessed May 23, 2020.

  3. Experian. "Understanding Secured Credit Cards." Accessed May 23, 2020.

  4. Capital One. "Secured Mastercard From Capital One." Accessed May 23, 2020.

  5. Discover Financial Services. "What to Do If You're Denied a Secured Credit Card." Accessed May 23, 2020.

  6. Discover Financial Services. "Discover It Secured Credit Card." Accessed May 23, 2020.

  7. TD Bank. "You May Be Eligible for a TD Bank Unsecured Card." Accessed May 23, 2020.