Secured cards · continued
Secured Credit Cards
What to Do If You Are Denied
Because a deposit reduces the issuer's risk, secured cards have some of the highest approval odds available, but approval is still not guaranteed. Applications can be declined for reasons such as unpaid defaults with that same issuer, insufficient income, or recent bankruptcy activity. If you are turned down, the issuer must send an adverse action notice explaining the main reasons, which tells you what to address.
From there, you can look for a different secured card with more flexible criteria, work on the specific issues cited, or wait until your situation stabilizes before reapplying. Avoid firing off many applications in quick succession, since each can add a hard inquiry. A measured approach, fixing the stated problem and then applying once, protects your score and improves your odds the next time around.
Frequently asked questions
- Do I get my security deposit back?
- Yes, the deposit is refundable. As long as you pay your balance and close or upgrade the account in good standing, you receive the deposit back. Many issuers return it automatically when they graduate you to an unsecured card. The issuer only keeps the deposit if you default and stop paying.
- Does a secured card build credit as well as a regular card?
- Yes. A secured card reports your payment activity to the three major bureaus exactly like an unsecured card, so it builds credit through the same mechanism. Paying on time and keeping your balance low will improve your score just as effectively as with a standard card.
- How much should I put down as a deposit?
- Choose an amount you can comfortably afford that also gives you a workable limit. Since your deposit usually equals your limit, a slightly larger deposit can make it easier to keep utilization low, but what really drives improvement is paying on time and using little of your limit, not the deposit's size.
- Is a secured card the same as a prepaid card?
- No, and the difference matters. A prepaid card is loaded with your own money and does not report to credit bureaus, so it cannot build credit. A secured card is real revolving credit backed by a deposit, and it reports to the bureaus, which is what makes it a credit-building tool.
- How long until I can graduate to an unsecured card?
- There is no fixed timeline, but many people become eligible after several months to about a year of on-time payments and low balances. Some issuers review accounts automatically and upgrade you, while with others you request an upgrade or apply for a new card once your score has improved.
- Will a secured card charge me interest?
- It can, because secured cards often carry high APRs, but interest only applies if you carry a balance from month to month. If you pay your full statement balance by the due date every month, you are not charged interest on purchases, and the high rate never affects you.
Advertiser disclosure: general information only, not financial advice. Confirm current terms on the issuer's official site before applying.