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.
Secured Credit Cards: Myths About Credit Cards & Security Deposits
Key points about: secured credit cards and security deposits
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Secured credit cards require a cash security deposit and provide a credit limit equal to your security deposit.
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You may qualify for a secured credit card even if you don’t have a credit score.
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Secured credit cards can help you build or rebuild your credit history with responsible use.
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.
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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- Minimum Security Deposit: A minimum security deposit of $200 is required to open this account and your security deposit must equal your credit limit. Your maximum credit limit (up to $2500) will be determined by your income and ability to pay.
- Graduation Transparency (Secured Card): Monthly reviews start your seventh month as a customer. We will refund your security deposit if you have made all payments on time for the last six consecutive billing cycles on all your Discover accounts including any loans, and you've remained in “good status” on all credit accounts you are responsible for whether they are Discover accounts or not. “Good status” means: (1) your credit report shows no delinquencies, charge-offs, repossessions, or bankruptcies for the six months prior to our review; and (2) your Discover Secured Card is not in a prohibited status at the time of our review, including, but not limited to: closed, revoked, suspended, subject to tax levy, garnishment, deceased, lost/stolen, or fraud. Monthly reviews may be delayed if you change your payment due date. We typically process your refund in 2-3 business days based on your delivery preference. If you close your account and pay in full, we’ll return your deposit within two billing cycles plus ten days.
- Build Credit History (Student Card): Discover reports your credit history to the three major credit bureaus so it can help build your credit if used responsibly. Late payments, delinquencies or other derogatory activity with your credit card accounts and loans may adversely impact your ability to build credit.
- You earn a full 2% Cashback Bonus® on your first $1000 in combined purchases at Gas Stations (stand-alone), and Restaurants each calendar quarter. Calendar quarters begin January 1, April 1, July 1, and October 1. Purchases at Gas Stations and Restaurants over the quarterly cap, and all other purchases, earn 1% cash back. Gas Station purchases include those made at merchants classified as places that sell automotive gasoline that can be bought at the pump or inside the station, and some public electric vehicle charging stations. Gas Stations affiliated with supermarkets, supercenters, and wholesale clubs may not be eligible. Restaurant purchases include those made at merchants classified as full-service restaurants, cafes, cafeterias, fast-food locations, and restaurant delivery services. Purchases must be made with merchants in the U.S. To qualify for 2%, the purchase transaction date must be before or on the last day of the offer or promotion. For online purchases, the transaction date from the merchant may be the date when the item ships. Rewards are added to your account within two billing periods. Even if a purchase appears to fit in a 2% category, the merchant may not have a merchant category code (MCC) in that category. Merchants and payment processors are assigned an MCC based on their typical products and services. Discover Card does not assign MCCs to merchants. Certain third-party payment accounts and digital wallet transactions may not earn 2% if the technology does not provide sufficient transaction details or a qualifying MCC. Learn more at Discover.com/digitalwallets. See Cashback Bonus Program Terms and Conditions for more information.
- Build credit with responsible use: Discover reports your credit history to the three major credit bureaus so it can help build/rebuild your credit if used responsibly. Late payments, delinquencies or other derogatory activity with your credit card accounts and loans may adversely impact your ability to build/rebuild credit.
- *Discover reports your credit history to the three major credit bureaus so it can help build your credit if used responsibly. Late payments, delinquencies or other derogatory activity with your credit card accounts and loans may adversely impact your ability to build credit.
- **Minimum Security Deposit: If approved, you must make a minimum security deposit of $200 (or more, in increments of $100 up to $2,500), which will equal your requested credit limit. Discover will determine your maximum credit limit by your income and ability to pay
- Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.