What Is a Secured Credit Card?

Poor credit or a nonexistent credit history can make it more difficult to be approved for a credit card. One option is to apply for a secured credit card.

A secured credit card is a card that requires the cardholder to secure the account with a deposit equal to the amount of the account’s credit limit. If you don’t pay your credit card balance, the credit card issuer will keep your deposit.

How Does a Secured Credit Card Work?

A secured credit card allows you to make purchases within a credit limit in exchange for a security deposit up front.

Apply for the card

Start by applying for the card. Getting the card isn’t guaranteed — your application can be turned down.

Provide a security deposit

Once you’re approved for a secured credit card, you’ll need to provide a security deposit equal to the credit limit on your account.

Use your card responsibly

Your Discover it® secured credit card is a real credit card, not a debit or prepaid card. Using your Discover secured credit card will build a credit history with the three major credit bureaus. If you use your secured card and other loans responsibly, you can build positive credit history. Late or missed payments on your credit card accounts and loans may adversely impact your credit. Start by charging small and manageable amounts and pay every bill on time and in full.

Does a Secured Card Work Differently From Prepaid Cards and Debit Cards?

Secured credit cards, prepaid cards and debit cards all require account holders to provide funds before any purchases can be made, but that is essentially where the similarities end. With prepaid and debit cards, the amount of each purchase is immediately subtracted from the balance of the account. But with a secured credit card, the money you put up — the refundable security deposit — is unaffected when you make a purchase and is not used to pay the account balance (unless you go into default or close your account with a balance). Rather, your charges will appear on your monthly statement with an amount due for that month. Your on-time monthly payments are separate from the money you put down initially.

Whereas most prepaid and debit cards generally do not report to credit bureaus, many secured credit cards do. This is why they are an attractive way to build credit a credit history — your responsible use counts for something.

And that’s why it’s critical that secured credit card users pay at least the minimum amount due on time each month on all their loans.

How to get the most from your secured credit card

Apply to Increase Your Credit Line

If over time you find that you need a higher credit limit, you can apply for a credit line increase and add to your security deposit.

Choose a secured credit card with rewards

Unlike some secured credit cards, the Discover it® Secured Credit Card offers rewards on purchases. The card earns two percent cash back at restaurants and gas stations on up to $1,000 in combined purchases each quarter.* Plus one percent cash back on all other credit card purchases. Discover will provide an unlimited dollar-for-dollar match of all the cash back you’ve earned at the end of your first year on your credit card.*

Transition to a standard, unsecured credit card

Some secured credit card issuers will periodically review your account to see if you qualify for an unsecured card. Discover starts monthly reviews 7 months after you open your secured credit card account.* After 7 months, Discover begins automatic monthly account reviews to see if you qualify to upgrade to an ‘unsecured’ card and get your deposit back.*

†† 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. 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 about your rewards.

Cashback Match: We’ll match all the cash back rewards you’ve earned on your credit card from the day your new account is approved through your first 12 consecutive billing periods or 365 days, whichever is longer, and add it to your rewards account within two billing periods. You’ve earned cash back rewards only when they’re processed, which may be after the transaction date. We will not match: rewards that are processed after your match period ends; statement credits; rewards transfers from Discover checking or other deposit accounts; or rewards for accounts that are closed. This promotional offer may not be available in the future and is exclusively for new cardmembers. No purchase minimums.

Getting your deposit back:  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 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.

Builds credit with responsible use: 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 other credit card accounts and loans may impact your ability to build credit.

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.