How to Use a Secured Card to Build Your Credit

If you have poor or nonexistent credit and have been struggling to get approved for a credit card, don’t worry, you’re not alone. Building good credit is a tricky situation, as you need good credit to get a credit card, but you need a credit card to build good credit. However, there is still hope.

In this article, we will explore an alternative solution to this problem: using a secured card. We’ll discuss what secured cards are, how they can help you build credit, the requirements to get one, and the potential risks involved.

By understanding these aspects, you’ll be able to make informed decisions to build a positive credit history and work towards financial freedom.

What is a Secured Credit Card?

A secured credit card functions much like a regular credit card, providing you with a revolving line of credit that you can use for purchases and repay each month. The key difference is that a secured card requires you to set aside a cash deposit as collateral. This deposit secures your line of credit, allowing you to prove your creditworthiness.

Let’s say you want a $1,000 spending limit. You would need to deposit $1,000 into an account tied to your secured credit card. This system promotes budgeting since your credit limit aligns with the amount you’ve deposited. If you’re unable to qualify for a traditional credit card but still want the convenience of paying with plastic, a secured card is an excellent alternative.

How Do Secured Credit Cards Help Build Credit?

If you have poor or no credit, opting for a secured card is an effective strategy to build a positive credit history. Using a secured card offers similar benefits to a regular credit card. You can use it for online and offline purchases, and your payment activities are reported to the credit bureaus.

By regularly utilizing your secured card to make purchases and diligently paying off the balance each month, you demonstrate responsible credit behavior. This, in turn, helps you establish a positive credit history over time.

Requirements for Obtaining a Secured Card

Not everyone qualifies for a secured credit card, as the approval depends on various factors, including the amount of your initial deposit, your income, and your ability to repay the funds. Other considerations may include recent bankruptcy filing or issues found in a background check, which can impact your creditworthiness when applying for a secured card.

A good starting point for obtaining a secured credit card is your current bank or a local credit union. Popular financial institutions like Capital One and Discover offer accessible lines of credit with low balances and zero annual fees.

The required initial deposit typically falls within the range of $200 to $2,000, depending on your approved credit limit and available cash. Remember, the deposit amount determines your line of credit on the secured card and your purchasing power.

Drawbacks and Risks of Secured Cards

Before committing to a particular secured card, take the time to thoroughly research and review the features of each option. Additionally, find out which credit bureau the card provider reports to every month. Ideally, you want a secured card that reports to multiple credit bureaus, maximizing your credit-building potential.

It’s crucial to avoid exceeding your credit limit, which is equal to the total amount of your initial deposit. Going over the limit can have negative consequences. Furthermore, if you fail to pay the full balance on your secured card each month, you will incur interest charges, just like with a traditional credit card.

How Long Does it Take to See Results?

Building a solid credit history using a secured credit card takes time and patience. You shouldn’t expect overnight results. Success primarily depends on your spending and payment habits. Here are some key factors that can impact your journey:

  1. Make regular payments on time: Paying the balance due on time is one of the most critical factors in establishing good credit. Ensure you make regular, timely payments every month.
  2. Pay your balance in full: Avoid charging purchases that you cannot pay off. Your goal is to make purchases and diligently pay them off regularly, demonstrating your reliability as a low-risk customer.
  3. Maintain a low credit utilization: Use your secured card responsibly by not maxing out the entire credit limit. Aim to utilize no more than 30 percent of your available credit to avoid negatively affecting your credit score.

By consistently adhering to these practices and managing your secured credit card responsibly, you can start seeing positive results within a few months. Typically, after about a year, the financial institution will upgrade your account to a traditional credit card.


Secured credit cards are powerful tools for rebuilding credit for individuals with poor or no credit history. By using them responsibly and with careful consideration, you can maximize their benefits and pave your path to financial freedom.

As you embark on this credit-building journey, take the time to understand the potential risks and drawbacks associated with secured cards. With patience, dedication, and proper usage, a secured card can help you establish a solid credit history and create a brighter financial future.

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