How do secured credit card deposits work?

Why do secured cards require a security deposit?

Secured credit cards are designed as a mechanism to help people with little to no credit history as well as those looking to rebuild their credit. Because these applicants may present more risk, they require a cash deposit upfront as collateral. The deposit is usually refundable, but the issuer holds it and only uses it if you default on your balance.

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Unlike unsecured or traditional credit cards, where your credit limit is based on your credit profile, a secured card's limit matches your deposit. For example, a $500 deposit would typically give you a $500 credit limit.

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Can you pay your credit card bill with the security deposit?

No, you cannot use your security deposit to pay your monthly bill. The security deposit exists  as collateral against cardholders whose accounts become delinquent.

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Can I change my security deposit?

Many secured card issuers allow cardholders to add funds to their deposit and increase their credit limit. Using your card responsibly could also lead to automatic limit increases, which can help boost your credit score.

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How much do secured card deposits cost?

This can depend on each secured card issuer. OpenSky offers secured credits for as low as a $100 security deposit, which would equal the credit limit. With card issuers in general, you can always deposit more than the minimum amount required, but most secured cards have a maximum you can't go over. Because your credit limit is equal to or tied to your security deposit, it varies based on how much you put down initially. In some cases, you may be able to add additional funds later. The good news is that the more you demonstrate good credit usage, the closer you get to qualifying for unsecured cards—which don't require a security deposit, have higher limits, and better rewards and perks.

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How to submit a deposit on a secured credit card

You’ll likely pay the security deposit when you submit your application for a secured credit card. However, the timing can vary from card to card.

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1. Determine your budget

Because the security deposit is required upfront, it's essential to determine how much you can afford before applying. If you need help deciding how much to put down, consider starting with a smaller amount like $200. You may also be able to take advantage of features such as layaway, at issuers such as OpenSky.

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However, if you can, putting down a larger deposit can help improve your credit score by increasing your available credit and keeping your credit utilization ratio low. Plus, having a higher limit means your credit score is less likely to be negatively affected by your spending.

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2. Choose a card

When choosing between cards, be sure to compare deposit requirements, fees, interest rates (APRs), rewards, and potential upgrade options. Consider not just the initial deposit but also the ongoing costs to make sure the card fits comfortably within your budget. If you have a lower score, you may want to focus on cards that don't require credit checks.

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If you're thinking of opening a secured credit card with OpenSky, our applicants have an 89% approval rate.¹ Cardholders typically see an average 47-point increase in their credit score within the first six months.²

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3. Submit an application

You can usually apply for a secured credit card online through the card issuer's website. When filling out your application, you’ll likely need to have this information on hand:

• Full legal name
• Social security number (SSN) or individual taxpayer identification number (ITIN)
• Street address
• Phone number
• Employment status
• Annual income before taxes
• Housing costs (rent or mortgage)

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4. Submit your security deposit

To quicken the process, you may be able to fund your card during the application process. Again, this can vary from card to card—some issuers may allow you to make the deposit after you’re approved but before you activate the card.

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Keep in mind that you may also need to pay additional fees, such as application, processing, or annual fees to open your account. The good news is that you can pay these with a debit card, so all you have to do is ensure you have enough funds to cover the initial amount.

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5. Start using your card

Once you receive your secured credit card in the mail, you can use it to make everyday purchases, like buying groceries or booking a vacation. Just remember to stay on top of your spending and pay your monthly bill on time. That way, you'll start building or improving your credit in no time.

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Want tips on best practices for using a secured credit card? Learn more about strategies to build or rebuild your credit.

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When do you get your security deposit back?

You'll get your deposit back when you close your account in good standing—meaning you've paid your balance in full. Some credit card issuers automatically upgrade you after a series of on-time payments. If your card doesn't offer a clear upgrade path, you can always apply for an unsecured credit card on your own.

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If you feel you've outgrown your secured credit card and decide to close the account, you'll typically get your full security deposit back. However, closing credit card accounts can reduce your available credit and potentially lower your credit score, so it's best to keep the account open if possible.

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In summary

A secured card can be a helpful tool for building credit, especially if you have little to no credit history or are working to improve a low score. When you apply, you'll need to make an initial security deposit, which is usually equal to your credit limit. While putting up a bigger sum of money upfront may feel scary, choosing an amount that’s right for your budget is essential—it can help set you up for financial success. No matter what the amount is, by using your card wisely and keeping your spending in check, your credit score will thank you in the long run.