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Pros of Secured Credit Cards

Build or Rebuild Credit¹

Using a secured credit card responsibly helps build your credit history.¹ You’ll typically see an increase in your score by keeping your balance low and paying your bill on time every month.

No Minimum Credit Score Required

Secured credit cards have fewer approval requirements than unsecured cards, making them accessible if you have bad credit or are building your credit.² The security deposit serves as collateral, reducing the risk for the card issuer.

Accepted at Retailers and Online

Secured credit cards can be used just like unsecured cards – at the grocery store, online, for travel, etc.

Same Benefits as Unsecured Cards

Secured credit cards offer security and fraud protection benefits just like unsecured cards. Some issuers even provide rewards programs, allowing you to earn points or cash back statement credits.

Refundable Deposit

Your deposit is fully refundable when you close your secured card account in good standing.

Cons of Secured Credit Cards

Initial Cash Deposit:

Secured cards require an upfront deposit, usually ranging from $200 to $2,000, which serves as your line of credit. While it’s refundable, this deposit might be challenging when finances are tight. If the deposit is a limitation, try to earmark funds – such as your tax refund – to lessen the impact to your wallet.

Lower Credit Limits

Since your line of credit is determined by your deposit, secured credit cards often have lower credit limits than unsecured cards. While this encourages responsible spending, it may hinder larger purchases.

High Interest Rates

It’s important to be aware of the Annual Percentage Rate (APR) associated with any credit card. Secured credit cards can come with high interest rates.² The higher your APR, the more interest you’ll pay on any balance you carry.

man smiling with First Latitude Card in hand

The pros of secured credit far outweigh potential disadvantages, making them a valuable tool for building credit. ¹ Whether
you’re establishing credit for the first time, or rebuilding bad credit, a secured card can help you reach your credit goals.  

¹Cardholders who keep their balance low and pay their credit card bill on time every month typically do see an increase in their credit score.
²Source: Equifax.com – https://www.equifax.com/personal/education/credit-cards/articles/-/learn/what-is-a-secured-credit-card-do-they-build-credit
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