What is a Secured Credit Card? Benefits of a Secured Credit Card


You have applied for a credit card in the past and you have been denied. Has this happened to you? Now you are wondering if you will be eligible for your own card. How can you prove that you can manage a card if no one gives you a chance?

The good news is that you have secured credit card options.

What is a secured credit card?

A secure credit card can be a best option for those who are establishing, building or rebuilding their credit. And building credit through responsible use can make you a better candidate for things like car loans, mortgages, and other credit cards.

The primary difference is that for card issuers, secured credit cards are offered on collateral like term deposits to reduce the risk level. A secured credit card is a card that is required to maintain cash security when you open an account.

The easiest way to improve your credit score is to reap the benefits of a secure credit card. These cards are offered on a fixed deposit which reduces the risk for credit card issuers. However, if you do not pay your bills on time, the credit card issuer may withdraw money from your deposit.

How does a Secured Credit Card Work?

The most important component of a secured credit card is that it is issued only on certain types of term deposits in a customer’s bank or any financial institution. It is basically given to customers who cannot get a normal credit card due to current income criteria or bad credit history. Therefore, these cards are safe because the bank with which the deposit is made has full right to withdraw the amount deposited to recover your loan in case of default in payment terms.

Customers holding this type of credit card have to continue with the term deposit in the bank till they use this secure credit card. Typically, the bank offers such customers a maximum of 85% cap against their bank deposits. Therefore, these cards work just like ordinary credit cards and the cardholder can also earn interest on deposits from banks or any financial institution.

Benefits of a Secured Credit Card

  1. Easy for those without a credit history: People who do not have a credit history can get these cards to start building a credit history that makes it easier for them to get a loan approval in the future.
  • Increase credit limits as well as earn interest on fixed deposits: Customers who opt for a secure credit card will not have to pay anything extra in addition to the processing fee. This card can help cardholders increase their credit limits as well as earn interest on their term deposits.
  • Build a good credit history: Banks usually issue credit cards to customers who have a good credit record or history. So, with a secure credit card, a person can work to build a good credit history even if they don’t have a normal credit card. This secure credit card can help a person build a good credit score by paying bills on time.
  • Increase the chances of a low interest loan: When you are offered a number of financial products by a bank, the bank will offer you a loan at a relatively low interest rate, be it a personal loan, auto loan or home loan.


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