If you’re new to credit or are trying to rebuild it after a financial setback, a secured credit card can be a powerful tool. It’s designed to help you establish or improve your credit history while also helping you build healthy money habits. In this post, we’ll break down how secured credit cards work, their benefits, and how to get one.

What We’ll Cover:

• What Is a Secured Credit Card?
• Unsecured vs. Secured Credit Cards
• Do Secured Credit Cards Build Credit?
• Benefits of a Secured Credit Card
• How Does a Secured Credit Card Work?
• How to Get a Secured Credit Card

Highlights

• Secured credit cards require a refundable deposit that becomes your credit limit.
• They’re designed to help you build or rebuild credit with responsible use.
• You don’t need a credit history to get one. Secured cards are easier to qualify for than traditional cards.

What Is a Secured Credit Card?

A secured credit card works like a regular credit card, but it’s backed by a cash deposit, usually held in a savings account or certificate of deposit (CD). That deposit acts as collateral, which is why it’s called “secured.”

Your deposit amount typically becomes your credit limit. For example, if you put down $300, your credit limit will be $300.

Unsecured vs. Secured Credit Cards

Most credit cards are unsecured, meaning you don’t need to provide a deposit. Your credit limit and interest rate are based on your credit score and financial history. If you have excellent credit, you’re more likely to qualify for better terms.

Secured credit cards are designed for individuals with no credit or poor credit history. They require a refundable security deposit, which reduces the lender’s risk. As a result, these cards are more accessible than their unsecured counterparts.

Here’s a quick comparison:

Do Secured Credit Cards Build Credit?

Yes! Secured credit cards are a great way to establish or rebuild your credit. Most financial institutions report your payment history to the major credit bureaus, like Equifax, Experian, and TransUnion, which means responsible use can help you improve your credit score over time.

To build credit effectively:

• Keep your balance below 30% of your credit limit
• Make on-time payments every month
• Avoid maxing out the card
• Pay in full when possible to avoid interest

Pro tip: Set up autopay or calendar reminders to avoid late payments, which can negatively impact your credit score.

Benefits of a Secured Credit Card

Establishes or rebuilds credit history

Life happens, and sometimes that means our credit takes a hit. Whether you’re starting from scratch or working to bounce back from past financial missteps, a secured credit card can give you the fresh start you need. Because it doesn’t require a credit history, it’s a great option for first-time borrowers or those looking for a second chance.

That said, simply having a secured credit card won’t automatically improve your credit. You’ll need to use it responsibly—keeping your balance low and making your payments on time each month—to see real progress.

Helps develop smart spending habits

Secured credit cards can also serve as a valuable learning tool. If you’re new to credit or working on improving your financial habits, using one can help you build discipline. For example, setting a budget for your card and only using it for planned purchases—like gas, groceries, or a monthly subscription—can help you stay in control of your spending. Since your credit limit is tied to your deposit, it also helps you avoid overspending, which is one of the biggest challenges with traditional credit cards.

Refundable deposit when you upgrade or close in good standing

When you open a secured credit card, your initial deposit acts as collateral, but it’s not a fee. As long as you manage your account responsibly, that deposit is fully refundable. You’ll get it back either when you upgrade to an unsecured credit card or if you choose to close the account in good standing.

More accessible for first-time borrowers or those with less-than-perfect credit

It can be tough to get approved for a traditional (unsecured) credit card without a strong credit history. That’s where secured credit cards shine. Because they require a deposit, they come with fewer credit requirements, making them a more inclusive option for people who are just starting out or starting over.

No annual fee when you choose Listerhill Credit Union

At Listerhill, we believe building your credit shouldn’t come with added costs. That’s why our secured credit card comes with no annual fee, so you can focus on your financial goals, not on paying unnecessary fees.

A simple path to upgrade

The process for upgrading your secured credit card may vary depending on the financial institution. At Listerhill, as your credit improves and you demonstrate responsible use, we’ll keep an eye out for opportunities to help you graduate to an unsecured credit card. We make the transition easy, so you can continue building your financial future with confidence.

How Does a Secured Credit Card Work?

A secured credit card starts with a deposit; this upfront amount acts as your collateral and becomes your credit limit. So, if you put down $300, that’s how much you’ll be able to spend on the card. From there, it works just like a traditional credit card. You can use it for everyday purchases, whether you're grabbing groceries or filling up at the gas station.

Each month, you’ll receive a statement with your balance. You’ll have the option to pay it in full to avoid interest or make at least the minimum payment to keep the account in good standing. Either way, making on-time payments is key. Most secured cards report your activity to the major credit bureaus, so consistent, responsible use can help boost your credit score over time.

And here’s the best part—after a period of solid payment history, many financial institutions (especially credit unions!) will give you the opportunity to upgrade to an unsecured credit card. When that happens, your original deposit is returned, and you continue building credit with even more flexibility.

How to Get a Secured Credit Card

1. Compare your options

Look for a financial institution that offers favorable terms, including low fees, reasonable rates, and personalized support. Credit unions often offer better terms than big banks and are more focused on helping members succeed financially.

2. Check your credit score

While you typically don’t need a high credit score to open a secured credit card, it’s still a good idea to check where you stand. Knowing your current score can help you understand what areas need improvement and give you a starting point as you work toward rebuilding or building a credit history.

3. Review the requirements

Some secured cards may have a minimum deposit requirement or may require a checking or savings account at the institution.

4. Apply

Most financial institutions allow you to apply online, by phone, or in person. Be prepared with your ID, proof of income, and banking information.

5. Make your security deposit

Once approved, you’ll fund your secured card with the agreed deposit, often ranging from $200 to $1,000 or more.

6. Start using your card

Once you receive your card (by mail or instantly at a branch), you can begin using it responsibly to establish a favorable credit history or recover from past credit issues.

Your Financial Wellness is our Priority

Whether you’re just starting your credit journey or getting back on track, a secured credit card is a smart, practical step. With responsible use, it’s not just a tool to build credit—it’s a gateway to better financial opportunities down the road.

Click the button below to see our secured credit card offer, check out our low rates, and apply online!

View Our Secured Credit Cards