Are secured credit cards worth it?

Making a deposit on a secured card can help you build your credit.

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A master-lock credit card

Secured credit cards might not always be a first choice credit card, but they are great for one thing — building or rebuilding credit. Unlike regular, unsecured credit cards, secured cards require a deposit to be made upfront in order to be issued and used. The deposit provides the issuer security in case the card user doesn’t make their payments.

Of course, all credit cards if used responsibly can help you build your credit but secured cards are designed for individuals who aren’t likely to get approved for an unsecured card. These individuals could have a bad credit history, a poor credit score, or simply no credit history at all.

What are the pros and cons of secured credit cards?

Because secured cards are designed for building credit, there are some trade-offs to consider.

Pros

  • Low approval requirements. These cards are designed for individuals with a poor credit score or little to no credit history. Find out more about your credit score and how to improve you credit here.
  • Good for building credit. Use your card responsibly, avoid making late payments, and it will help build your credit. Once you’re back on track, you can easily apply for a unsecured card that offers greater benefits and rewards.
  • Rewards. Earn cash back on your purchases with some secured cards, although the rewards rate will be lower compared to a unsecured rewards credit card.
  • Control over your credit limit. Your deposit acts as your credit line. Although limited by the card issuer, you essentially control the size of your credit line via your deposit. This can help you manage your spending and payments responsibly.
  • Potential to upgrade. You’re not stuck using a secured credit card forever and you can do more with it than simply build your credit. You could get upgraded to an unsecured card if your provider approves of your card usage and activity. This opens the door to greater rewards, perks, and benefits.

Cons

  • Upfront costs. Secured cards require a deposit to be issued a credit limit, usually between $200 – $500, but this deposit is usually refundable if you close your account.
  • Annual fee. While some cards offer a $0 annual fee, others charge an annual fee of $12.95 or higher.
  • Foreign transaction fee. Expect to pay foreign transaction fees of up to 3% for each transaction made abroad or online with foreign merchants. Secured cards aren’t generally designed for international travel.
  • No intro APR period. It isn’t common to find a secured card that offers an intro APR period on purchases, balance transfers or both.
  • No signup bonus. Generally, secured cards do not offer a signup bonus of any kind.

Compare secured credit cards

Name Product Required Deposit Purchase Interest Rate Cash Advance Rate Annual Fee Reward
Refresh Financial Secured Visa Card
$200 - $10,000
17.99%
N/A
$12.95
Take advantage of a low annual fee, with no credit check and guaranteed approval once you secure your credit card with some funds.
Take advantage of a low annual fee, with guaranteed approval and no credit check.
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Should I get a secured card?

If you have a poor credit score, limited to no credit history, and you’re struggling to find approval for a credit card, getting a secured credit card is definitely worth considering to help you build your credit.

Bottom line

Secured credit cards are designed for individuals with a poor credit score, limited to no credit history and who have difficulty qualifying for an unsecured credit card. These cards are structured to operate on a security deposit with a smaller credit limit to encourage responsible use and help you build your credit.

Depending on the card, you may not have to pay an annual fee and you could be offered limited cash back rewards. But most secured cards do not offer rewards, signup bonuses, and could come with a annual fee. If you’re not sure this kind of card is right for you, compare other credit builder cards here.

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