How do secured credit cards work?

A secured credit card is like a regular credit card but with a built-in safety net.

With a traditional credit card, you get a credit limit (how much money you can send on the card) based on your credit history and income. Usually the higher your credit score and income the higher your limit. 

With a secured card you’re not granted a credit limit upfront, instead have to put down a deposit and that becomes your credit limit. For example, if you put down a $200 deposit, you can only spend up to $200 on that card. That cash deposit is there to protect the bank in case you can’t pay your bill.

Just like with a traditional credit card, interest can still add up on a secured card if you only make the minimum payment.

Secured cards are great for people who are starting to build their credit scores or are rebuilding their scores. That’s because they’re easier to get approved for, usually have a credit limit that fits into your budget and can be a starting point to learn how to use credit responsibly.