Secured Credit Cards vs. Unsecured Credit Cards

A secured credit card can be an effective way to build or rebuild your credit profile.

Kallee Feuz Mar 22, 2018

Content originally published on Mar 22, 2018 and refreshed on Feb 4, 2021.

Paying with plastic has many perks: convenience, payment protection, rewards, and — often overlooked — credit-building power. But to qualify for most credit cards, you need to have good credit in the first place. This can pose a problem for people with no credit history or with a spotty credit record.

When you are starting out or starting over financially, a secured credit card can be an effective way to build or rebuild your credit profile. Here are answers to five frequently answered questions about secured credit cards.

Secured credit card FAQ #1: How is a secured credit card different from a traditional, unsecured credit card?

When you open an unsecured credit card, you get a line of credit based on the lender’s evaluation of your credit risk. Your credit limit is determined by factors like credit score and income.

With a secured credit card, you deposit money — usually a minimum of $200 or $300 — into a special savings account. This security deposit is used as collateral to reduce the lender’s risk in loaning you money.

After you make the initial deposit, a secured credit card looks and works just like an unsecured one, requiring monthly minimum payments and accruing interest charges on past due balances. You can use it wherever credit cards are accepted.

Secured credit card FAQ #2: Who should consider a secured credit card?

If you’re a newcomer to the credit market or if you’re someone who needs to repair poor credit history, a secured credit card is a great tool for establishing credit. As you make regular, on-time payments, you build a positive credit history. And after a certain period of time — generally about a year — many issuers will allow you to apply for an unsecured credit card and refund your deposit once the secured card has been closed.

Unsecured cards, which tend to come with lower interest rates and better rewards than secured cards, are the better option for people who already have good credit. Watch out, though, for traditional cards that are marketed to those with poor credit: they often carry high interest rates and hefty fees.

Secured credit card FAQ #3: What should you look for in a secured credit card?

Seek out a secured credit card that reports to all three major credit reporting bureaus.

Don’t settle for a card with undesirable terms and excess fees. It is possible to find a secured card that offers competitive rates and rewards. For example, Zions Bank’s AmaZing Launch® Secured credit card* gives you the choice of earning cash back or points rewards, in addition to charging low rates and fees.

Secured credit card FAQ #4: How can you get the most out of a secured card?

Never carry a balance on the card. Instead, buy a few small things — totaling less than 20 percent of your credit limit — and pay off the card every month.

While secured cards prevent you from spending money you don’t have, there’s no need to keep one longer than you have to. Check with your lender to see when you will be eligible to upgrade to an unsecured card.

Secured credit card FAQ #5: Where can you apply for a secured or unsecured credit card?

To find out more about secured credit cards or to apply for Zions Bank’s AmaZing Launch Secured credit card*, call or visit a Zions Bank location. Because of the extra paperwork needed to securitize the deposit on a secured card, applications must be submitted at a Zions Bank financial center.

*All credit cards subject to credit approval. There is a $25 annual fee for the AmaZing Launch secured credit card. Terms, conditions and restrictions apply.

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