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Secured Credit Cards: Myths About Credit Cards & Security Deposits

Last Updated: September 24, 2023
4 min read

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Key points about: secured credit cards and security deposits

  1. Secured credit cards require a cash security deposit and provide a credit limit equal to your security deposit.

  2. You may qualify for a secured credit card even if you don’t have a credit score.

  3. Secured credit cards can help you build or rebuild your credit history with responsible use.

If you have no credit history, limited credit, less-than-perfect credit, or if you’ve recently gone through financial hardship, you might think you won’t qualify for a credit card. But you could still qualify for a credit card by applying for a secured credit card account.

A secured credit card is a card that requires a cash deposit that’s equal to your credit limit.

The secured card is often misunderstood, though, since it works differently than an unsecured credit card. Some people have concerns about whether this card is the right fit for their needs. For example, some people who are considering applying for a secured credit card are concerned about how or when they’ll get their security deposit back. Others may wonder if a secured credit card is a “real” credit card that can help them build a credit history.

Don’t let these misconceptions keep you from applying for a secured credit card. The truth is, secured credit cards may be a great option to help you build good credit and establish a stable financial future.

Myth 1: Your credit card security deposit is nonrefundable

Reality: The security deposit on your secured credit card is fully refundable — you can get your security deposit money back if you close your account, so long as you pay your balance in full. If you cancel your account at any time and your balance is paid off, you’ll likely get a refund of your deposit, but the timing may vary from issuer to issuer.

Myth 2: You can’t increase the credit limit on a secured credit card

Reality: It’s true that, with a secured credit card, your credit limit is usually a portion of your security deposit, up to 100%, according to the Federal Trade Commission. But you can open a secured card with the minimum security deposit, then may be able to increase the credit limit for your secured credit card by providing an additional deposit, but only up to the original credit limit the card issuer approved you for, in accordance with the credit issuer’s policies.

Myth 3: You can’t afford a credit card security deposit

Reality: The security deposit for your secured card doesn’t have to be a huge amount; it just must be enough to open the account. Consider a secured card with a low minimum security deposit amount.

With the Discover It ® Secured Credit Card, your credit line will equal your deposit amount, starting at $200.1 So, once you save $200 dollars you can use it for your security deposit.

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Myth 4: Credit card security deposits are bad for your savings

Reality: A secured credit card can help you build your savings by giving you a reachable savings goal of the minimum deposit amount. With the Discover It ® Secured Credit Card, you can upgrade to an unsecured card after six consecutive months of on-time payments and maintaining good status on all your credit accounts2. Plus, you may find that using a secured credit card can make it easier for you to manage your overall monthly spending and establish good financial habits.

Myth 5: Secured cards are not “Real Credit Cards”

Reality: Sometimes people get secured credit cards confused with “prepaid cards” or debit cards. Prepaid cards or debit cards just withdraw money from a pre-existing balance of funds.  Secured credit cards actually work the same way as unsecured credit cards, and could help you build your credit history if your card issuer reports to the credit bureaus, you use it responsibly, and pay your bills on time.

Did you know?

The Discover It ® Secured Credit Card is a real credit card. You can use it to pay for purchases anywhere that Discover is accepted. And, since Discover reports your payment history to the three major credit bureaus it could help you build your credit history. Plus, Discover has no annual fee on any of our cards, even secured cards.

Myth 6: Secured credit cards don’t help your credit score

Reality: Many people who don’t have a credit history or don’t have a credit score can establish and build a credit history for the first time by getting a secured credit card. The Discover It ® Secured Credit Card helps you build your credit history.3

Myth 7: Secured cards don’t provide credit card rewards

Reality: While some secured credit cards don’t offer a rewards program, the Discover It ® Secured Credit Card lets you earn rewards just like other Discover credit cards. You earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter, automatically.4

How much will a secured credit card help your credit score?

Secured credit cards are usually used when you start your credit journey or to improve your creditworthiness. So, there’s no exact calculation on how much it can help your credit score. However, the Discover It ® Secured Credit Card can help you build credit with responsible use5. From there, you may qualify for credit cards with higher limits that don’t need security deposits backing them.

Don’t let the myths about secured credit cards hold you back. With a bit of research, you’ll see why secured credit cards can help you build a credit history. If you want to establish credit for the first time or rebuild your credit history, applying for a secured credit card may help you manage your spending and build a stronger financial future.


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