You put down a cash deposit — often $200 to $500 — which typically becomes your credit limit. You use the card like any other: make purchases, get a statement, and pay it off. As long as you pay on time, the deposit just sits as collateral; it isn’t spent. If you close the account in good standing, you get the deposit back. Miss payments badly enough, and the issuer can use the deposit to cover what you owe.
How Unsecured Credit Cards Work
No deposit is required. Approval is based on your credit history, income, and existing debt, so unsecured cards are harder to qualify for if you have thin or damaged credit. Most cards people think of as “normal” credit cards — rewards cards, cash back cards, travel cards — are unsecured.
Key Differences
| Feature | Secured Card | Unsecured Card |
|---|---|---|
| Deposit required | Usually yes | No |
| Approval odds with no/bad credit | Higher | Lower |
| Typical credit limit | Equal to deposit | Based on creditworthiness |
| Rewards | Rare, though some now offer them | Common, especially on premium cards |
| Reports to bureaus | Yes, if chosen carefully | Yes |
| Annual fee | Varies, some $0 | Varies |
Do Secured Cards Build Credit the Same Way?
Yes. A secured card reports your payment history and balances to the bureaus exactly like an unsecured card does, which is what actually builds your score. Confirm this before opening one, since not every secured card reports to all three bureaus. See how to build credit from scratch for the full picture.
When to Choose a Secured Card
- You have no credit history yet.
- You’re rebuilding after missed payments, a collection, or bankruptcy.
- You were denied for unsecured cards.
- You want a guaranteed way to get approved while you build history.
When to Choose an Unsecured Card
- You already have some credit history and a fair to good score.
- You’d rather not tie up cash in a deposit.
- You want rewards or a higher starting limit.
- You’re comparing options like cash back credit cards or cards for beginners with no deposit requirement.
Graduating From Secured to Unsecured
Many issuers automatically review secured accounts after roughly 6 to 12 months of on-time payments and may upgrade you to an unsecured card, refunding your deposit while keeping the account and its history open. If your issuer doesn’t do this automatically, you can ask, or apply for a new unsecured card once your score has improved.
Frequently Asked Questions
Is a secured credit card bad for your credit?
No. Used responsibly, it builds credit the same way an unsecured card does. It’s a tool for building history, not a mark against you.
Do I get my deposit back from a secured card?
Yes, typically when you close the account in good standing or the issuer upgrades you to an unsecured card.
Can I get a secured card with no credit check?
Some issuers do a soft pull or no credit check at all for secured cards, though policies vary, so check before applying if this matters to you.
Which builds credit faster, secured or unsecured?
Neither is faster on its own. What matters is on-time payments and low utilization, regardless of which type of card you use.
Disclosure: This article is for educational purposes only and is not financial advice. Some links on this site may earn us a commission at no cost to you. Read our affiliate disclosure and full disclaimer. Card terms change often, so confirm current rates and fees with the issuer.