A secured credit card is a type of credit card that is backed by a cash deposit from the cardholder. This deposit acts as collateral on the account, providing the card issuer with security in case the cardholder can’t make payments.

With a secured credit card, the amount that you put down in a deposit will become your credit limit for your credit card.

Secured credit cards are often issued to subprime borrowers, or those with poor or limited credit histories (so-called thin-file borrowers). Because the card issuer will report on secured credit cards to credit reporting agencies, these cards can help borrowers improve their credit score.

How a Secured Credit Card Works

Most credit cards are unsecured: There is nothing guaranteeing or “securing” your ability to pay off your accrued balance, which is basically money that you owe to the credit card company. Its contract with you has you agreeing to pay your balance in whole or in part each month, but you’re not putting up any of your assets or income to back that promise. (That’s one reason why credit card interest rates are so high: Unsecured debt is always more costly than secured debt, such as mortgages or car loans, to compensate for the lack of collateral).