Secured credit cards: how they work

A secured card is one of the most common ways to build or rebuild credit. Here is what to look for.

How it works

You put down a refundable deposit, and that deposit usually becomes your credit limit. You use the card and pay the bill like any other credit card.

Why it helps

A secured card reports to the credit bureaus like a regular card, so on-time payments and low balances build positive history.

What to look for

Choose a card that reports to all three bureaus, has low or no annual fees, and offers a path to "graduate" to a regular card and get your deposit back.

Use it lightly

Keep the balance low compared with the limit and pay on time every month. When you close or upgrade the card in good standing, the deposit is returned.