The chicken-and-egg problem with credit is that you need to have a credit history to get credit. Fortunately, there’s an easy tool you can use to quickly build your credit: a secured credit card.

A secured card functions much like an unsecured credit card with a few key differences. To get a secured card, you put down a security deposit with the credit card company, which typically sets a credit limit equal to that amount. “So a $500 deposit equals a $500 credit limit,” says Bruce McClary, vice president of communications for the National Foundation for Credit Counseling (NFCC).

You then use your secured card just as you would any other credit card, and your credit history grows as the card issuer reports your account activity to the credit bureaus. Use your card responsibly, and you can build a positive credit history and a good credit score.

Do you think a secured credit card might be right for you? Learn a bit more about secured cards to help increase your chances of building good credit and moving on to a regular credit card.

How to Open a Secured Credit Card With Discover

If you’re seeking a secured credit card in order to build your credit, make sure the credit card issuer reports to the three major credit bureaus: Equifax, Experian and TransUnion.

Once you know the card will help you build credit, it may be time for you to apply. To apply for a Discover it® Secured credit card, you fill out a simple application that contains information about you, your employment and your income. Discover then reviews your application. If it’s approved, you get to choose the amount of your refundable deposit, which can be between $200 and $2,500.

How do you decide how much money to put down when opening a secured credit card? The first factor to consider is your financial situation, McClary says. In other words, how much can you afford to put down right now?

The other variable to consider is how you plan to use your card. If you intend to use it only for small purchases to build credit, then a deposit of a few hundred dollars can work well, McClary says. But if you plan to make larger purchases on your card, it’s probably a good idea to put down more. That may help ensure that you have a high enough limit to accommodate your purchases without using too much of your available credit. Keep in mind that it’s best for credit building if you keep your balance well below half of your credit limit. (See tip No. 3 below for more details.)

You will get your security deposit back in the future if you pay your bill as agreed, but the credit card company will hold onto the funds so long as your account is open or until you can move on to an unsecured credit card.

Using a Secured Credit Card to Build Your Credit

A secured credit card can be an excellent way to build credit, but simply getting one isn’t enough. It’s important to use your new card the right way. Consider these four ways to build your credit with a secured credit card:

1. Start Small

It’s important to make regular purchases on your card to show creditors that you can use credit responsibly. However, you want to be sure you never charge more than you can easily pay off in full each month. Avoid the temptation of a shopping trip to your favorite store and start by simply charging a small item that you already buy each month. For example, you can set a $10 or $15 monthly subscription for a video or music streaming service to be automatically paid with your card. “Small, recurring charges are the way to go,” McClary says.

2. Pay On Time Every Time

Maybe the best thing you can do to build good credit is to always pay your bills on time or early. “You want to do everything you can to make timely payments,” McClary says. Pick a strategy that works for you to make sure the bill gets paid. For example, you can get into the habit of paying your bill each time you make a purchase, McClary says.

You also can set up text or email alerts from your credit card company to remind you when your bill is coming due. Or you can automate your payments to make sure your balance gets paid in full each month. If you go that route, put an alert in your calendar to remind you to verify that the payment was made. “It’s still very important for you to log in and check activity,” McClary says.

3. Keep Your Balance in Check

It’s key to monitor your credit utilization rate, that is, the percentage of available credit that you’re using. Industry experts recommend keeping your balance to less than 30 percent of your credit limit at all times. This shows your creditors that you’re using credit responsibly and not overextending yourself financially. This can help you build good credit because amounts owed make up almost one-third of your FICO® Score.

4. Keep Score

It’s important to keep tabs on your credit-building progress, McClary says. You want to make sure your credit card account is being reported accurately, he says. According to the Federal Trade Commission, you can check your credit for free at By federal law, you are entitled to one free report per year from each of the major bureaus, and you can check a different bureau every four months to monitor your credit throughout the year. Also check your FICO® Score after about a year, McClary recommends. When your FICO® Score hits the national average, now around 704, he says, you should be ready to try to move to an unsecured card.

Switching From a Secured Card to Unsecured

Your credit card company may do periodic reviews of your credit and even automatically switch you to an unsecured card — and return your deposit — at some point. But you might want to call your card issuer to ask about your options.

Once you’ve got that unsecured card in your wallet, you may find that your secured card was a temporary but useful tool on your credit-building journey.

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