4 Benefits of a Secured Credit Card

For consumers with bad or no credit history, a secured credit card can be a suitable option for many reasons. A secured credit card is a card that is literally “secured” by a cash deposit provided by the consumer, which doubles as part of or their entire line of credit. 

While secured cards don’t provide the same benefits and spending power as unsecured credit cards, they are helpful for consumers who need a bridge to those higher-end cards. Here are four reasons to apply for a secured credit card.

Generally, consumers applying for a secured credit card don't need a credit check to get approved. This means applicants with bad credit or no-to-limited credit history have easier access to secured cards compared to unsecured cards, as long as they can provide the security deposit, which can vary in amount. In this sense, a secured card is a stepping stone for consumers who want access to more premium credit cards.

Since the cash deposit on a secured card becomes part of or the entire line of credit, cardholders do not have access to a high credit limit, as is typical with unsecured cards. Instead, a secured card provides consumers the opportunity to develop good credit behavior by using the credit available while paying their bills on time. This also prevents cardholders from taking on credit debt that they might not be able to pay back. 

Issuers who provide secured credit cards may offer credit increases to users who make regular, on-time payments. A higher credit line can result in a bigger boost to a cardholder’s credit score as it illustrates their ability to pay bills with larger balances. However, the cardholder must continue to make on-time payments to keep the increased credit line and not cause damage to their credit score. 

Most importantly, the responsible use of a secured credit card can reflect positively on a consumer’s credit report and credit score. Most issuers of secured cards report data to the same top three credit bureaus that they do for unsecured card accounts. Building a stronger credit history is the key benefit of a  secured card, as it can increase the chances a consumer is approved for (link: /learn/about-loans/how-personal-loans-can-help-borrowers-with-poor-credit text: different financial products). 

Overcoming bad credit can be difficult, which is why a secured credit card can be advantageous for certain consumers. With its various benefits, a secured credit card can help someone get on the right track in building or rebuilding their credit, while improving their chances of getting approved for more functional credit cards in the future.