Best Secured Credit Cards Of July 2023

Many large and small banks, and even credit unions, offer a range of different secured credit cards.

We chose the best secured credit cards depending on a wide range of criteria including:

• Reporting to all three major credit bureaus
• Fees
• Rewards earning
• Deposit requirements
• Graduation to non-secured cards

Knowing which of these is most important for your current situation can help guide you in the right direction for your next secured credit card application.

To learn more about our rating and review methodology and editorial process, check out our guide on How Forbes Advisor Rates Credit Cards.

A secured credit card is a credit card backed by a security deposit. Before using the card, a user deposits money into a bank account. Your secured card credit limit will be equal to your deposit amount.

Secured cards have much in common with traditional credit cards—you can use them to make purchases, pay off a balance and build good credit with responsible spending habits. Some secured cards offer rewards and other benefits much in the same way unsecured counterparts do.

How Do Secured Credit Cards Work?

A secured card works like any other credit card with one big difference: Your credit limit will be determined by the amount of cash you put in a deposit account to guarantee the credit line.

Your deposit essentially acts as collateral when you open a new account. If you fail to make payments or pay off your balance, the card issuer will keep your deposit and potentially cancel the account.

A card issuer is more likely to take a chance on a person with poor credit after guaranteeing an amount of money to fall back on. For this reason, secured credit cards are a good option for those with no or poor credit.

The size of a deposit depends on the cardholder’s credit history and the card issuer’s terms. Deposits typically range from $200 to $3,000, but it may be possible to find a secured card with a higher deposit.

When starting or rebuilding your credit profile, it may be tempting to use a secured credit card. While secured credit cards certainly have their advantages, there are some negatives as well that you should take into consideration when deciding which card is right for you.

Pros of Secured Cards

• Secured credit cards can help you build credit from scratch. Just like an unsecured credit card, secured credit cards report to the credit bureaus. And, assuming you keep your payments on time, they can help you build up your credit score.
• They typically have easier approval requirements. You may be able to receive approval with a lower credit score or even none at all since your initial deposit is being used as a collateral for the bank.
• Your deposit is refundable. No matter how much you put down, your deposit should be refundable as long as you don’t miss any payments and pay off your entire balance before closing the card.
• Some secured cards have rewards. While not all secured credit cards offer rewards, some offer traditional perks just as unsecured credit cards do.

Cons of Secured Cards

• Secured credit cards require an upfront deposit. Because of this, you’re going to be out the money you deposit until you decide to upgrade or close the card.
• Many have high fees and high interest rates. Because many users of secured credit cards are either new to credit or rebuilding their credit, credit card companies may experience a higher rate of default. This in turn leads to a higher interest rate and perhaps other ancillary fees. Make sure to check all your options to see which one has the best terms.
• Secured credit cards typically have lower credit limits. Remember, your initial credit limit is typically based on your deposit amount. So your credit limit is likely to be on the lower side with a secured card, especially in the beginning.

Your payment history is the most important factor affecting your credit score. A secured credit card allows you to build a positive payment history by making small purchases and paying them off and on time every month.

Secured credit card payment records will be reported to at least one of the major credit agencies. Skipped payments or defaults can lower your credit score, so always pay your bill on time.

Credit utilization is another major factor used to calculate your credit score. When using any credit card, it’s important not to use too much of your available credit. Spending too near your credit limit may indicate you’re overleveraging your credit and be a major negative to lenders evaluating your creditworthiness. Try not to use more than 30% of your available credit and, if possible, keep your credit utilization below 10%.

The best secured credit cards report monthly to all three major credit bureaus, allowing cardholders to improve credit scores across the board. The card issuers will likely report payment history and balances or credit utilization.

A new secured card account can take one to two months to appear on your credit report. First-time cardholders may not see activity appear on a credit report for up to six months. Be patient and keep spending responsibly.

Applying for a secured credit card is nearly the same process as applying for any other credit card. You’ll need your name, birthday, address, Social Security number and income information to start your application. The process differs slightly from there when you’ll also need to link your bank account to provide the security deposit for the card.

Where Can I Get a Secured Credit Card?

Many banks offer secured credit cards. If you’re interested in applying for one, we recommend that you review the cards on this list that we’ve identified as the best secured cards on the market to determine which one best suits your needs.

Secured vs. Unsecured Credit Cards

A few alternatives to secured credit cards may be better for certain borrowers.

Unsecured Cards for Bad Credit

Some card issuers offer credit cards specifically for customers with limited, fair or poor credit. If receiving approval for an unsecured card is important to you, options exist—they aren’t always ideal and may offer terms that don’t favor the best financial interests of the borrower.

The Capital One QuicksilverOne Cash Rewards Credit Card is available to people with limited or fair credit, and though it charges a $39 annual fee, the card also earns 1.5% cash back on every purchase and 5% cash back on hotels and rental cars booked through Capital One Travel.

Submission of a credit card application usually results in a hard credit check. If you receive a denial, try waiting to apply for the next card; your credit score may suffer if you apply for too many credit cards in a short period.

Prepaid Debit Cards

Some people may not want to own a credit card, and that’s okay. If a card is necessary to make a purchase but not needed to build credit, prepaid cards can be a good alternative.

Prepaid cards are loaded with cash similar to a gift card. These can be used to purchase something at a store or online in the same way a credit card is. Some can even be used to make ATM withdrawals. The amount available depends on how much the cardholder deposits onto the card. Deposits can typically be made in cash, by bank transfer or using direct deposit.

The downsides to using prepaid cards include the fact purchase activity isn’t reported to credit bureaus. If you’re trying to build up your credit, prepaid cards won’t help you get there. Another downside is security: Many prepaid debit cards are treated like cash and if you lose it or if someone steals the card, you may not be able to get your money back.

Credit-Builder Loans

Credit-builder loans provide a “training wheels” option for building credit without using a credit card.

Unlike personal loans, where a borrower receives money right away, credit-builder loans hold a predetermined amount of money in an account the borrower pays off in monthly installments. The lender reports the borrower’s payment activity to credit bureaus over the course of the loan. On-time payments help the borrower build a good credit score.

Most lenders still charge interest for credit-builder loans. This means borrowers are making payments on the principal balance and paying interest on top.

A secured credit card can help avoid credit-builder loans as long as the balance is paid in full every month.

Personal Loans

Personal loans have many uses including consolidating credit card debt, paying for an unexpected expense or simply paying for a few months of rent.

Personal loans can help users build good credit by adding variety to the types of credit in a credit history and by creating positive payment activity. Using a personal loan to consolidate credit card debt can help cardholders reduce credit utilization.

Personal loans usually charge interest, although rates are lower compared to credit cards. A main difference is personal loans do not offer grace periods during which a balance can be paid down without incurring interest charges.

By now you’re probably trying to decide if you should apply for a secured credit card. The decision is indeed a personal one, but it should come down to three factors.

First, if you don’t have any established credit history, a secured credit card is the way to go. Because secured credit cards report to the credit bureaus, you’ll be able to start establishing yourself as a good credit risk.

Second, if you’ve had a tough time in the past with credit cards, a secured credit card is a viable option to help you get back on track. This is incredibly helpful if you’ve struggled in the past with getting a loan or an unsecured credit card.

Lastly, make sure that you can afford the security deposit. The initial deposit can range between $200 to $500 or even more, so plan ahead if you’ll need to save up for that.

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