What Is a Secured Credit Card?
A secured credit card requires you to make a cash deposit—typically between $200 and $2,500—which serves as collateral and usually equals your credit limit. If you deposit $500, you get a $500 credit limit. The card works just like any other credit card for purchases, and your payments are reported to the three major credit bureaus.
Secured cards are designed for people who are building credit from scratch or rebuilding after financial setbacks. Because the deposit protects the issuer from default, approval rates are much higher—even for people with no credit history or scores in the 500s.
What Is an Unsecured Credit Card?
An unsecured credit card does not require a deposit. The issuer extends you a credit line based entirely on your creditworthiness—your credit score, income, and debt levels. Most credit cards you see advertised are unsecured. They typically offer better rewards, lower fees, and higher credit limits than secured cards.
To qualify for a good unsecured card, most issuers look for a credit score of at least 620–640 (Fair range), though premium rewards cards require 700+.
Secured vs Unsecured: Side-by-Side Comparison
| Feature | Secured Card | Unsecured Card |
|---|---|---|
| Deposit Required | Yes ($200–$2,500) | No |
| Credit Score Needed | None (or very low) | 620+ (varies by card) |
| Credit Limit | Equal to your deposit | Based on creditworthiness ($500–$50,000+) |
| Annual Fees | $0–$49 (some free) | $0–$695 (varies widely) |
| Rewards | Rarely; some offer 1–2% cash back | Yes; 1.5–5% cash back or points common |
| APR | 22–29% typical | 15–29% depending on score |
| Credit Building | Yes—reports to all 3 bureaus | Yes—reports to all 3 bureaus |
| Upgrade Path | Often upgradeable after 6–12 months | No upgrade needed |
When to Choose a Secured Card
A secured credit card makes sense if you:
- Have no credit history and can't qualify for an unsecured card
- Have a poor credit score (below 580) from past financial problems
- Need a guaranteed path to build credit with controlled spending
- Are helping a young adult or college student start their credit journey
The best secured cards to consider include the Discover it Secured (2% cash back at gas and restaurants, 1% elsewhere, no annual fee) and the Capital One Platinum Secured (no annual fee, potential for a higher limit with just a $49 deposit for qualifying applicants).
When to Choose an Unsecured Card
An unsecured card is the right choice when you:
- Already have a credit score of 620 or higher
- Want to earn rewards on everyday spending
- Don't want to tie up cash in a security deposit
- Are looking for a lower interest rate or better terms
If you're in the Fair range (580–669), starter unsecured cards like the Capital One Platinum or Petal 2 are worth considering. These have no annual fee and are designed for credit-builders who don't quite qualify for premium cards.
Can You Upgrade From Secured to Unsecured?
Yes—and you should plan for this from the start. Most major issuers who offer secured cards (Discover, Capital One) will review your account after 6–12 months of responsible use. If you qualify, they'll upgrade you to an unsecured card and return your deposit, often without a hard inquiry. This is the ideal path: build credit with a secured card, then graduate to the rewards ecosystem of an unsecured card.
Frequently Asked Questions
Does a secured credit card build credit as well as an unsecured card?
Yes. Both secured and unsecured cards report to the three major credit bureaus the same way. The credit-building effect is identical as long as you pay on time and keep utilization low.
What happens to my deposit when I close a secured credit card?
When you close a secured card in good standing or upgrade to an unsecured card, the issuer returns your deposit, usually within 2–4 billing cycles.
How long should I keep a secured credit card before upgrading?
Most issuers review your account for an upgrade after 6–12 months. It's worth calling your card issuer to ask after 8–12 months of on-time payments and low utilization.