Secured Credit Card
A secured credit card uses money you place in a security deposit account as collateral. A security deposit gives lenders the confidence that you will pay them back, even if you have damaged credit or no credit history. That’s because if you fail to pay your bill, the lender can keep your deposit.
Your credit line is based on your income, your ability to pay, and in most cases, the amount of your security deposit. For example, if you put $1,000 into the deposit account, your available credit line would be $1,000 if you have sufficient income and can demonstrate your ability to pay.
A secured credit card is not the same thing as a prepaid card—in this case, your deposit acts as collateral and doesn’t count toward payments.