How to choose a secured credit card: deposit, fees and the path to graduation

How a secured card works

A secured card is a real credit card backed by a cash deposit. The CFPB describes putting an amount equal to your credit limit in an account as a deposit; its example is $500. When you pay the bill, your available credit is restored. The CFPB also says fees and interest rates can be high for secured cards, that using one can help establish a credit record, and that as you show you can pay on time your limit may be raised and your deposit refunded.

The deposit is not a payment. You still get a monthly bill, interest still applies to any balance you carry, and late payments are still late payments. The deposit only protects the issuer if you stop paying. A prepaid card is different: the CFPB lists prepaid cards among things that do not help rebuild credit, because the money is your own, loaded in advance.

The comparison checklist

Use these questions on every card's terms page and agreement. A card that fails the first two is rarely worth opening.

What two issuers' terms say

These are examples of how terms differ, not recommendations. Figures are from the issuers' pages on October 29, 2026.

Discover's secured card page lists no annual fee, a required deposit of $49, $99 or $200 based on creditworthiness that unlocks a credit line of at least $200, and a maximum limit assigned at approval from $1,000 to $3,000. Deposits must be at least $20 in whole dollars, paid by electronic transfer within 35 days of approval. Discover says card status is reported to the three major credit bureaus, that with a positive track record the deposit is returned and the account becomes unsecured with other card terms unchanged, and that the deposit is refunded if you close the account and pay the balance in full.

Capital One's help center says the required deposit and credit limit vary by card, the deposit is due within 35 days of approval and can be paid in installments of at least $20, and you can raise the limit by depositing more, up to a maximum, before activation. A secured card cannot be upgraded by request; Capital One reviews eligibility periodically and notifies you by mail, and the deposit comes back as a statement credit on upgrade. If you close the card, the deposit is applied to the balance within 7 to 10 days and any excess is generally refunded by check after two billing cycles.

The fee cap that protects small credit lines

Regulation Z section 1026.52(a) limits the total fees you are required to pay in the first year after opening to 25% of the credit limit in effect when the account opened. Late fees, over-the-limit fees, returned-payment fees and fees you are not required to pay are excluded. The official commentary says a security deposit charged to the card account counts as a fee under this limit, while a deposit not charged to the account does not.

Worked example with an invented card: a $300 credit line means first-year required fees cannot exceed $75. If a card's annual and monthly fees together approach that number, a quarter of your available credit goes to the issuer before you use it, which also pushes up your utilization. A no-annual-fee card avoids the problem entirely.

Using the card so it graduates

Neither issuer publishes a fixed timeline, so treat graduation as something you earn with a clean record rather than a date. The habits below are the ones the CFPB and the scoring companies point to.

• Put one small recurring bill on the card and set autopay for the full statement balance, so every month shows an on-time payment and no interest.
• Keep the reported balance low relative to the limit; our utilization guide shows how a $200 or $300 line fills up quickly.
• Never miss a due date; a late payment works against the record you opened the card to build.
• Check your credit reports after a few months to confirm the account appears and is reported correctly.
• Once the card graduates or your deposit is returned, keep the account open if it has no annual fee; the CFPB notes closing a card can raise your utilization.