Secured vs. Unsecured Credit Cards: What's the Difference?
Quick answer: A secured credit card requires a refundable cash deposit, which usually becomes your credit limit. An unsecured credit card doesn't require a deposit; the bank lends you money based on your credit. Both build credit the same way, because both report your payments to the credit bureaus.
Secured vs. Unsecured at a Glance
| Secured card | Unsecured card | |
|---|---|---|
| Deposit | Yes, usually $200–$500, refundable | No |
| Credit limit | Usually equal to your deposit | Set by the bank |
| Approval | Easier, good for bad or no credit | Needs fair to excellent credit |
| Fees | Many have $0 annual fee | From $0 to high fees (for bad-credit cards) |
| Builds credit? | Yes | Yes |
| Rewards | Sometimes (e.g., Discover it Secured) | Common with good credit |
What Does "Unsecured Credit Card" Mean?
"Unsecured" means the debt isn't backed by collateral. If you don't pay, the bank has no deposit to take, so it relies on your credit history and income to decide whether to approve you and how high your limit should be. Most credit cards in your wallet are unsecured.
How a Secured Credit Card Works
- You apply and, once approved, pay a security deposit (for example, $200).
- You get a card with a limit equal to that deposit.
- You use it and pay the bill like any credit card. The deposit isn't used to pay your bill.
- The issuer reports your activity to Equifax, Experian and TransUnion.
- After 6–12 months of on-time payments, many issuers refund the deposit and upgrade you to an unsecured card.
How to use a secured card to build credit
- Put one small recurring bill on it.
- Keep the balance under 30% of the limit (under $60 on a $200 limit).
- Pay in full and on time every month; use autopay.
Does a Secured Card Build Credit? How Much Will It Raise My Score?
Yes, a secured card builds credit exactly like an unsecured card. How much your score rises depends on your starting point. People with no credit often get their first score after about 6 months of activity; people rebuilding can see gains within months if they pay on time and keep balances low. Late payments, on the other hand, hurt just as much as on any other card.
Best Cards of Each Type
- Secured: Discover it® Secured, Capital One Platinum Secured, opensky® Secured Visa®.
- Unsecured for bad credit (higher fees): Milestone, Indigo.
Compare them in best credit cards for bad credit.
Frequently Asked Questions
Do you get your secured card deposit back?
Yes, when you close the account with a $0 balance or when the issuer upgrades you to an unsecured card.
Is a secured card worse for my credit than an unsecured card?
No. Credit reports don't show whether a card is secured, and scores treat them the same.
Can I get a secured card with bad credit?
Usually yes. Some secured cards, like OpenSky, don't even check your credit.
Is a secured card the same as a prepaid card?
No. A prepaid card doesn't build credit. See can a prepaid card build credit.
Updated September 2026. Sources: Consumer Financial Protection Bureau guidance on secured credit cards and issuers' published card terms. This article is for information only and is not financial advice.
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