About Secured Credit Cards

A secured credit card is a special type of credit card. With a regular credit card (or charge card), you borrow money first and then pay it back later. With a secured card, you first deposit a certain amount of money into the card account, called a deposit, before you can use it. The spending limit on a secured card is usually equal to the deposit. If you want a secured card that can make a one-time purchase of $1,000, you generally need to deposit $1,000 into the secured card account in advance.

Secured cards look somewhat similar to prepaid cards, because both require you to put money in first. The biggest difference is that with a secured card, after the monthly statement comes out, you still need to pay back the amount you spent, similar to a credit card; if you do not pay it off in full, interest will accrue. With a prepaid card, you can only spend the money you have loaded onto it, so there is no interest issue. The difference between a secured card and a regular credit card is, of course, that one requires a deposit and the other does not. Also, if you owe money on a credit card and do not pay, the bank can only try to collect from you through collections; if you owe money on a secured card and do not pay, the bank can directly deduct the amount from your deposit.

From a credit history perspective, secured cards are the same as credit cards: your repayment and delinquency information will be reported to the three credit bureaus. Therefore, payments on a secured card also affect your credit score. Paying on time can help your score rise, while not paying what you owe can hurt your score. Prepaid cards are not reported to credit bureaus, because you are spending your own money and there is no borrowing involved. For this reason, secured cards are often used by people with poor credit or no credit history to gradually build or repair their credit history.

In short, you can think of a secured card as a product that sits between a credit card and a prepaid card.

Applying for and Using Secured Cards

From an application perspective, applying for a prepaid card generally does not require a hard pull. Whether a secured card involves a hard pull depends on the bank’s requirements, while credit cards generally do involve a hard pull on your credit report. Online applications for secured cards usually require an SSN or ITIN, though requirements vary by bank. If you do not have an SSN, you can ask a bank branch whether there are other application methods. Some secured cards require you to have a bank account, such as a checking or savings account, when you apply.

In terms of difficulty, secured cards also fall between prepaid cards and credit cards. Because the deposit itself serves as collateral, secured cards do not place as much emphasis on your income.

The general process is as follows:

  • Apply for a secured card: Applying for a secured card is similar to applying for a credit card. You can apply online, by phone, or in person. The bank may pull your credit report to check whether you qualify for a secured card.
  • Make a deposit: Usually, you provide your bank account number and routing number during the application. Once the application is approved, the bank will automatically pull the money from your bank account. If there is not enough money in your bank account, your secured card application may very likely be denied.
  • Receive the card: Banks usually wait until your deposit has been received before mailing out the secured card. Once you receive and activate the card, you can use it. The credit limit is generally equal to your deposit amount.
  • Use the card: Use the card each month, then pay according to the statement balance, or pay early if you prefer. If you feel the limit is not enough, some cards allow you to increase the limit by depositing more money. Be sure to make your payments, otherwise you will be charged interest.
  • Upgrade: After using a secured card for a while, it may be possible to upgrade it to a regular credit card, and many banks offer this feature. After the upgrade, your deposit will be automatically refunded. Different banks have different review periods and will decide whether to upgrade you based on your usage.

Recommended Secured Cards

Many banks issue secured cards, and their benefits and annual fees vary. I personally recommend choosing a larger bank for a secured card. On the one hand, there are usually fewer pitfalls and customer service tends to be more professional; on the other hand, after using the secured card, you may be able to upgrade it to a regular credit card from that bank. Credit cards from major banks tend to be more stable and often have decent benefits. That said, secured cards generally do not have much in the way of welcome bonuses, and their benefits are usually more limited than regular credit cards.

Here are a few secured cards that I think are relatively good.

Discover it Secured

The biggest feature of this card is that it offers 5% cash back in rotating quarterly categories and 1% cash back on other purchases. It also has first-year Cashback Match, meaning Discover will match all the cash back you earn in your first year. For a secured card, the rewards are quite strong, and there is no annual fee. You do not need an existing credit score to apply, though the application will still go through a normal review. Depending on the applicant’s situation, the minimum deposit may be only $49/$99/$200, which can get you at least a $200 limit. If you want to increase the initial limit, you can also add more deposit; the maximum limit is determined based on the application result, currently ranging from $1,000-$3,000. After normal use, eligible cardholders may also have the deposit refunded and be upgraded to a regular Discover it cash back card.

  • Welcome bonus: Double cash back on all cash back earned in the first year
  • Cash back: 5% cash back in quarterly designated categories, activation required and subject to quarterly caps; 1% cash back on other purchases
  • Minimum deposit: $49/$99/$200, depending on application result
  • Credit limit range: Minimum $200; maximum limit $1,000-$3,000 based on review result
  • No annual fee
  • Discover Secured application link>>

Bank of America Secured

BofA now has several secured cards, all with a minimum deposit of $200 and a maximum of $5,000. The bank will periodically review the account and decide whether to refund the deposit based on factors such as your overall credit history, account usage, and relationship with BofA. The biggest advantage of BofA secured cards is that they can be upgraded to regular BofA credit cards, and the upgraded versions are all quite useful. BofA currently requires an SSN for online credit card applications. If you do not have an SSN, you can ask a local BofA branch whether there are other application options.

  • Bank of America Customized Secured (in the first year, you can choose a 6% cash back category; 2% cash back at supermarkets and wholesale clubs; 1% cash back on other purchases)

Citi Secured

This card is also very basic. It has no annual fee, but it also does not offer any cash back. You can get a credit limit of $200-$2,500 by making a deposit. Starting as early as the 9th month after account opening, Citi will review whether the card can be upgraded to Citi Diamond Preferred. If it is not upgraded, Citi will continue to review it on a 12-month cycle afterward. Citi currently allows applicants to provide an SSN or ITIN when applying, but the official website also clearly states that a valid SSN is required on the account if you want to upgrade from Secured.

Capital One Secured

The Capital One Platinum Secured is also a very basic card. It has no annual fee, but it also does not offer any cash back. Depending on your credit profile, your minimum deposit may be $49/$99/$200, which gets you a credit limit of at least $200. If you feel the credit limit is not enough, you can continue adding to your deposit, with an initial credit limit of up to $1,000. After normal use, you may also have the opportunity to get your deposit refunded and upgrade to a regular Platinum credit card.

Capital One now also has another card, the Quicksilver Secured. It likewise has no annual fee and a minimum deposit of $200, but it earns 1.5% cash back on all purchases. If you can get approved for this card, it is clearly a better deal than the Platinum Secured, which has no cash back at all.

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US Bank Secured

US Bank now also has several pretty good secured cards. Their deposit ranges are all $300-$5,000, and they all have no annual fee. Compared with secured cards used purely to build credit, the rewards on these US Bank cards are already fairly close to those of regular credit cards. After normal use, if you are eligible, you may also have the opportunity to be automatically upgraded to the corresponding regular credit card and get your deposit returned.

  • US Bank Altitude Go Secured (up to 4X at restaurants, for takeout, and on food delivery; 2X at grocery stores, gas stations, EV charging, and streaming; 1X on other purchases)
  • US Bank Cash+ Secured (choose two categories each quarter to earn up to 5% cash back, choose one everyday category to earn 2% cash back, and earn 1% cash back on other purchases)

Should You Apply for a Secured Card?

In my view, secured cards are not especially useful for Chinese readers. On the one hand, Chinese consumers tend to plan their spending carefully and rarely run into situations where they cannot pay what they owe. On the other hand, Chinese consumers generally have relatively good credit histories, so they do not necessarily need to build credit through a secured card. In addition, applying for a secured card itself requires an SSN, so if you have an SSN, I recommend simply applying for a regular credit card directly. For example, even if you have no credit history, if you have income, applying for a Discover it is still better than applying for a Discover secured card. For international students who just arrived in the U.S. and do not have an SSN, if you have opened a bank checking account, starting with a secured card to build credit history is also fine. However, the Deserve EDU, which used to be a common student card for applicants without an SSN, is no longer accepting new applications. The more realistic approach now is to first see whether you can use an ITIN to apply for an entry-level credit card; if you have neither an SSN nor an ITIN, you can directly ask the bank where you opened your account whether it has any secured cards you can apply for.

To sum up:

  • No SSN, no income, student: First see whether you can use an ITIN to apply for an entry-level credit card; if you do not have an ITIN, you can ask the bank where you opened your account whether it has any secured cards you can apply for
  • No SSN, no income, other status: Ask a bank whether you can apply for the secured cards mentioned in this article
  • Have SSN, no credit history: It is better to apply for entry-level credit cards such as Discover it and BofA Customized Cash Rewards
  • Have SSN, very poor credit history: Apply for the secured cards mentioned in this article and slowly rebuild your credit history
  • Have SSN, decent credit history: Just apply for a regular credit card