How Does a Secured Credit Card Work?

How does a secured credit card work? In short, it’s a debit or prepaid card that requires you to deposit funds before you make a purchase. These deposits are not used to pay the account balance until you default or go over your credit limit. The security deposit is only used to cover monthly payments, not to pay the balance on the account. In some cases, the refundable security deposit may be applied to the account balance if you fall behind in payments.

Interest rates

The annual percentage rate (APR) of a secured credit card is often more than 20%. This is higher than the national average, but it’s acceptable for people with bad credit to qualify for a card with a high APR. If you’re unsure of what your credit score is, it’s best to compare secured credit card rates before applying for one. These figures will help you understand how much you should expect to pay on your secured credit card in total over time.


A secured credit card is the easiest type of credit card to qualify for. However, consumers with bad credit may have trouble obtaining approval for this type of card. Listed below are some of the fees associated with a secured card. Learn more about them before signing up for one. Fees for a secured credit card vary, but there are several key factors to consider when choosing a secured credit card. Keep reading to learn more about secured credit card fees and rates.

Requirement to make deposit

A secured credit card requires a cash deposit before issuing a card. This deposit reduces the risk to the card issuer, who can keep the money as long as the account is active. The deposit amount varies depending on the card, but is typically $49 or more. Depending on the issuer, the deposit amount can be higher or lower, making it possible for you to find the right card for your spending habits.


A secured credit card requires a deposit of at least $200 to open the account. This minimum deposit will help you start building credit. A secured credit card has high annual percentage rates. Typically, they are over twenty percent, but are within the national average of just under twenty percent. This means you probably won’t qualify for the best rate. If you are unsure whether a secured card is right for you, check with the company to learn more.

Convertibility to unsecured card

Depending on your circumstances, you may want to convert your secured credit card to an unsecured one. While this process can be done easily, keep in mind that closing your secured card will negatively impact your credit score. To avoid this outcome, try to keep your secured card open. This will give your credit history a longer history to work with. If your credit does not improve, you can always apply for an unsecured card later on.

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