What is a secured credit card, and how does it help build credit?
A secured credit card is backed by a refundable cash deposit that becomes your credit limit, and it builds credit by reporting your payments to a credit bureau.
Quick answer
A secured credit card works like a regular credit card, with one difference: you put down a refundable security deposit when you open the account, and that deposit acts as collateral for the credit line. You use the card normally, the issuer reports your payment activity each month, and a record of on-time payments builds your US credit history over time. When you close the account in good standing, your deposit comes back.
What you need to know
- A secured credit card requires a refundable cash deposit, which usually equals your starting credit limit.
- The deposit is collateral, not a prepayment. You still pay your monthly statement balance like any other credit card.
- The card issuer reports your activity to a credit bureau, which is what builds your credit history.
- Secured cards are designed for people with no US credit history, thin credit files, or past credit damage.
- Used responsibly, a secured card can help you graduate to unsecured cards, mortgages, and auto loans with better terms.
How a secured credit card works, step by step
The mechanics are simple, but each step matters.
- You apply and get approved. Approval is based on basic eligibility (income, ability to pay, identification) rather than an existing credit score, which is why secured cards are accessible to newcomers and ITIN holders.
- You fund a refundable security deposit. Most secured cards set a minimum deposit somewhere around $200 to $300, and the deposit usually equals your starting credit limit.
- You receive your card. Activate it and you can use it anywhere Visa® is accepted, online or in person.
- You make purchases. The deposit is not spent; it sits in an FDIC-insured account as collateral. Your purchases create a balance you owe at the end of the billing cycle.
- You pay your statement. At least the minimum payment is required by the due date. Paying the full balance avoids interest charges and is the strongest credit-building habit.
- The issuer reports your activity. Each month, your payment history, balance, credit limit, and account age are sent to a credit bureau.
- You build a credit history. Months of on-time payments and keeping your balance low show up as a positive record on your credit report.
Secured credit card vs unsecured credit card
The two card types behave the same way at the register, but the approval path and risk profile are different.
| Feature | Secured credit card | Unsecured (regular) credit card |
|---|---|---|
| Refundable deposit required | Yes | No |
| Credit limit | Usually equal to your deposit | Set by the issuer based on your credit profile |
| Approval requires existing credit history | No | Usually yes |
| Reports to a credit bureau | Yes | Yes |
| Builds credit with on-time payments | Yes | Yes |
| Earns rewards or cashback | Sometimes | Often |
| Deposit refunded when account closes in good standing | Yes | Not applicable |
A secured card is the on-ramp; an unsecured card is what most people graduate to once they have a track record.
How a secured credit card helps build credit
A secured card builds credit the same way any credit card does: through what gets reported to a credit bureau each month. Four parts of your card activity matter most.
- Payment history is the single largest factor in most credit scoring models. Paying on time every month becomes your strongest signal.
- How much of your limit you use also matters, something lenders call credit utilization. A simple rule of thumb is to use less than 30% of your limit, and the less the better. On a $200 limit, that means keeping your balance under $60.
- Length of credit history matters. The longer your account stays open and active, the more your credit history matures.
- Account mix and new credit also factor in. A secured card adds a revolving account to your file, which is useful if you only have an auto loan or no credit at all.
Because a secured card is reporting these signals every month, a few months of consistent, responsible use can start to move your score, and 12 months of on-time payments can put you in a meaningfully different position than where you started.
Why a secured credit card is useful for someone new to US credit
US lenders, landlords, insurers, and even some employers check credit reports. If you are new to the country, your credit file is empty, which often reads as "no information" rather than "good or bad." That can make it hard to:
- Rent an apartment without a large deposit or a co-signer.
- Get approved for a phone plan or utility account without a deposit.
- Qualify for an auto loan or mortgage at competitive rates.
- Get a regular unsecured credit card.
A secured card solves the chicken-and-egg problem: you do not need credit to qualify, and the act of using it generates the credit history that future lenders will look for. The deposit makes approval possible without an existing score, and the monthly reporting builds the score you do not yet have.
What to look for in a secured credit card
Not all secured cards are equal. Before you commit, check these:
- Deposit range. A low minimum (around $200) keeps the card accessible if you do not have a large amount to set aside.
- Credit-bureau reporting. Confirm the card reports to at least one major US credit bureau. If it does not, it cannot help you build credit.
- Annual fee and other fees. Look for a clear, predictable fee structure.
- Path to credit-line growth. Some cards let you increase your limit by adding to the deposit, and some include automatic credit-line increases tied to on-time payments.
- Refundable deposit terms. Confirm when and how your deposit is returned.
- No-SSN eligibility, if relevant. If you do not have a Social Security Number, look for a card that accepts an Individual Taxpayer Identification Number (ITIN) or alternative ID for application.
- International acceptance. A card that runs on the Visa® or Mastercard network is accepted nearly everywhere in the world.
How MAJORITY can help
The MAJORITY Visa® Secured Credit Card is built for members who are new to US credit. It is issued by WebBank, Member FDIC, and the security deposit can be any amount between $200 and $3,000, with the deposit becoming your initial credit limit. Card activity is reported to a credit bureau each month, and the Credit Boost feature can grow your credit line beyond your deposit by adding up to 5% of your on-time monthly payments as an unsecured credit-line increase, subject to the terms and the monthly cap in the credit card agreement. Membership is $6.99 per month, and the secured credit card is one of the products included.
Frequently asked questions
Is a security deposit on a secured credit card the same as a payment?
No. The security deposit sits in a separate FDIC-insured account as collateral and is not used to pay your monthly bill. You make purchases, receive a statement, and pay the statement balance like you would on any other credit card. The deposit is returned when you close the account in good standing.
How quickly does a secured credit card help my credit score?
There is no guarantee, but many people start to see movement within 1 to 3 months of consistent on-time payments and low balances, with more meaningful changes over 6 to 12 months. The longer you use the card responsibly, the stronger the signal becomes.
Can I get a secured credit card without a Social Security Number?
Some secured credit cards accept an Individual Taxpayer Identification Number (ITIN) or alternative documentation in place of a Social Security Number. Eligibility depends on the issuer and on standard checks like income, identification, and ability to repay. The MAJORITY Visa® Secured Credit Card, for example, is designed for members building credit in the US, including those without a US credit history.
What happens to my deposit if I miss payments or close the account?
With the MAJORITY Visa® Secured Credit Card, your deposit stays in a separate FDIC-insured account as collateral, so a single missed payment does not put it at risk on its own. You pay your monthly bill like any other credit card, and a missed payment is reported to a credit bureau, which can lower your score. When you close the account in good standing with your balance paid off, your deposit comes back to you. If an account is closed while a balance is still owed, the deposit can be applied to it, and you are still responsible for anything left over.
Is a secured credit card the same as a prepaid card or a debit card?
No. A debit card or prepaid card uses money you already have, so activity on those cards is not reported to the credit bureaus and does not build credit history. A secured credit card lets you borrow up to your credit limit, generates a monthly statement, and is reported to a credit bureau, which is why it builds credit and a debit card does not.
What is a typical deposit range for a secured credit card?
Many secured cards set a minimum deposit between $200 and $500, with maximums often in the $2,000 to $3,000 range. Your deposit usually becomes your initial credit limit, so a $300 deposit gives you a $300 line of credit.
Disclosures
The MAJORITY Visa® Secured Credit Card is issued by WebBank, a member of the FDIC, pursuant to a license from Visa U.S.A. Inc.
Qualification for the MAJORITY Visa® Secured Credit Card is based on meeting eligibility requirements, including income and expense requirements, having a Majority account in good standing, and establishment of a security interest. Criteria are subject to change.
Since your credit history is reported to major credit bureaus, it can help build/rebuild your credit if used responsibly. Other factors, such as late payments or delinquencies with your other accounts or loans, may adversely impact your credit. There is no guarantee regarding any impact on your credit score.
Credit limits are set based on a creditworthiness review. Not all applicants will qualify for the maximum limit.
Boost amount (i.e., the amount of the credit line increase) is up to 5% of the monthly on-time payment of at least the minimum payment due and is subject to other terms and conditions, including but not limited to an ability to repay check and a monthly cap in the credit card agreement.