Many people find that by using a secured card carefully, it takes only about a year to improve their credit score enough that they're able to qualify for an unsecured card. Some issuers will let you transfer your secured line of credit to an unsecured one , which is better for your credit score because it doesn't require you to open a new account.
But even if you do have to apply for a new unsecured credit card, you may be able to enjoy some of the benefits of having good credit — lower interest, rewards and more competitive fees. When that day comes, your time rebuilding your credit with a secured credit card will have been worth it. A secured credit card is a credit card that requires you to provide a cash security deposit to open an account. The deposit protects the issuer from losing money if you don't pay your bill, so secured credit cards are easier to get for people with bad credit or no credit history.
When you open a secured credit card account, you provide a cash security deposit. Once the account is open, you use a secured card like any other credit card: You make purchases with it, and then you pay off those purchases. Note that the money from your security deposit is not "loaded" onto the card, and it is not used to pay for your purchases.
Your deposit comes into play only if you fail to pay your bill. If that happens, the card company will use your deposit to cover the amount you owe — and if it has to do that, it will probably close your account. Using a secured credit card responsibly can help you build credit to the point where you qualify for a regular "unsecured" card.
You may be able to upgrade your secured card to an unsecured option from the same issuer, or you can apply with a different issuer. If you upgrade or close your secured card account in good standing, you get your deposit back.
A secured credit card is one of the easiest and quickest ways to build credit, provided you use it responsibly:. Use the card regularly, but don't max it out. Pay your bill by the due date every month. To avoid being charged interest, pay the full balance shown on your statement.
Some secured card holders are able to boost their credit enough to qualify for a regular card in less than a year.
If you close your secured card account in good standing — meaning you have paid in full — you'll get your deposit back. If you upgrade your account to an unsecured card from the same issuer, you should also get your deposit back. All information, including rates and fees, are accurate as of the date of publication and are updated as provided by our partners. Some of the offers on this page may not be available through our website.
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Offer pros and cons are determined by our editorial team, based on independent research. The banks, lenders, and credit card companies are not responsible for any content posted on this site and do not endorse or guarantee any reviews. Advertiser Disclosure: The offers that appear on this site are from third party companies "our partners" from which Experian Consumer Services receives compensation.
This compensation may impact how, where, and in what order the products appear on this site. The offers on the site do not represent all available financial services, companies, or products. Use it to build your credit, then get a better card. Some of the top secured credit cards come from issuers that also offer products for good or excellent credit.
When you've improved your credit enough, you can upgrade your account to an unsecured card and get your deposit back. Upgrading allows you to keep your same account but with a new card attached to it. That can help your credit because the age of your accounts is a factor in your credit scores. A few credit card companies have an automatic upgrade process.
With other card issuers, however, it's on you to request an upgrade. The rules on qualifying for an upgrade can be vague , so keep an eye on your credit score. And don't be afraid to call customer service and ask whether you're on track. Finally, some secured cards come from issuers that specialize in consumers with less-than-good credit.
As a result, they might not have good unsecured products for your upgrade. With these issuers, you'll have to close your account to get your deposit back or leave it open for a while and consider it an investment in your credit score. The lack of an upgrade option doesn't mean you should never pick a secured credit card from that issuer.
You'll just need to understand that your upgrade path will take you elsewhere. Grace periods are standard on most credit cards, but sometimes cards for people with bad credit don't have them.
Make sure yours does. Obvious question: What's a grace period? If you roll over a balance on your credit card from one month to the next — that is, if you don't pay the full balance shown on your statement — then you'll be charged interest on all purchases as soon as they hit your statement. However, if you pay your statement balance in full, then no interest will be charged on new purchases until after your next statement's due date. That interest-free period is the grace period.
To put it in simpler terms, if you pay your credit card balance in full and on time every month, you shouldn't have to pay any credit card interest. Having a grace period is important because the interest rates on secured credit cards are typically high.
When you're selecting a secured credit card to build or rebuild your credit in the short term, you have different needs from someone with excellent credit looking for a card to use long term. Two of the most important considerations for people with excellent credit are the card's ongoing interest rate and the rewards earned by the card.
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