secured credit card
A credit card requiring a cash deposit as collateral — the deposit typically becomes the credit limit.
Example
“The secured credit card with a $500 deposit helped him rebuild after bankruptcy.”
Memory Tip
SECURED — your deposit protects the lender. Your on-time payments protect your score.
Why It Matters
Secured credit cards matter because they provide an accessible way to build or rebuild credit history when traditional credit is unavailable. For people with no credit or poor credit scores, this tool helps establish payment patterns that can eventually lead to qualifying for unsecured cards with better terms and rewards.
Common Misconception
Many people mistakenly believe that using a secured credit card means the bank will take their deposit if they miss a payment. In reality, the deposit simply serves as collateral and remains yours as long as you make on-time payments; missed payments damage your credit but do not automatically result in the deposit being forfeited.
In Practice
A person with limited credit history deposits 500 dollars into a secured credit card account, which becomes their 500 dollar credit limit. They use the card for small monthly purchases like groceries and utilities, paying the full balance on time each month. After 12-18 months of responsible use, the card issuer may upgrade them to an unsecured card and return their original deposit.
Etymology
From Latin 'securus' meaning safe — the deposit secures the card against default.
Common Misspellings
Check your credit score free — no impact
Related Terms
More in credit
Other credit terms you should know
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