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How to Use a Secured Credit Card Responsibly

Jackie Lam • September 8, 2021

Using credit cards responsibly is the number one best way to build and improve your credit. Secured credit cards are a great way to establish credit if done properly. Learn how to use a secured credit card the right way.

Have less-than-awesome credit? If this is the case, perhaps you avoid credit cards and loans altogether. 

Why? Just like someone who has been burned in the dating scene, if you apply for a credit card, you may get rejected. And if your application is accepted, you may get stuck with unfavorable terms and rates. 

But there’s some good news. There are legit, relatively easy ways to build credit. One of those ways is to get a secured credit card. 

In this guide, we’ll explain what a secured card is, and why it’s super important to use it wisely. We’ll also outline the potential consequences if you don’t use your secured credit card responsibly. 

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What is a secured credit card?

When you get a secured credit card, you’ll generally be required to pony up cash as a form of collateral. This collateral serves as a form of backup in case you have trouble paying back the balance. 

The limit on your credit varies, and it usually matches your deposit amount. So, if you drop $200 for your deposit, $200 is generally your credit limit. If you start with $300 as your deposit? Then that amount would likely be the spending limit on your card. 

Other than that, you use a secured credit card the same way you’d use a regular credit card.

Why is it important to use a secured credit card responsibly?

If you’re starting to rebuild your credit, using a secured credit card wisely will show lenders that you can use credit responsibly. For this reason, a secured card can be a good option if you’re looking for ways to build credit

And, when you use credit wisely, it can boost your credit score. 

Just like any other credit card, you have to make the minimum payment on your balance by the due date. If you don’t pay on time, you can incur a late fee. If you don’t use a secured credit card responsibly and make your payments on time, you can also get dinged with hefty late fees and penalties. 

Once you’re 30 days late on a payment, this can be reported to the credit bureaus. No bueno, right? 

Remember: You probably signed up for a secured credit card to boost your credit score, not deflate it. So, make sure you use a secured credit card responsibly.

Best ways to use a secured credit card responsibly

If you don’t use your secured credit card responsibly, you can dig yourself into debt. Or, you may harm your credit score. To avoid this, try following these 3 important tips:

  1. Always make the minimum payment. As payment history makes up the bulk of your credit score — 35%, to be exact — this takes top priority. “Secured card issuers report delinquencies to the credit bureaus, just like unsecured card issuers,” says credit expert John Ulzheimer. “Just because you paid a deposit doesn’t mean you don’t have to make your required payments.” If you anticipate having trouble making on-time payments, see if you can shift the due date so it’s more in sync with your cash flow. Another thing you might consider doing? Lowering your limit. This way you’re not tempted to spend more than you can reasonably handle.
  2. Know the fees. Be in the know of all the fees you might get dinged with — annual fees, late fees, returned payment fees, and cash advance fees. And that’s just for starters.
  3. Pay off your balance and be mindful of your credit score. If you can pull it off, aim to pay off your balance in full each month. But, if you carry a balance, make sure it’s as low as possible. “If you care about the card’s impact on your credit scores, then you’ll want to maintain a balance that’s no more than 10% of the limit,” says Ulzheimer. And as Ulzheimer points out: Because secured card limits are notoriously low, the card can be easily maxed out or heavily leveraged. In turn, this can be horrible for your credit scores. If it’s the only credit card you have, and your limit is $500, then you won’t want to put more than $50 on the card, in order to keep your balance under 10% of the limit. A major downside to secured cards? You bet. “This will likely severely limit the ability for you to use the card,” he says.
Did you know that Chime's Credit Builder card¹ has no annual fees, 0% APR and does not require minimum security deposit? Learn More

How to build credit with a secured credit card

Secured credit cards are a fantastic option for those who are trying to build or establish credit. Building credit with a secured credit card is all about practicing good credit habits, such as making on-time payments, keeping a low balance, and paying down debts.

Most secured credit cards will report your payment activity to the 3 credit reporting bureaus — Equifax, Experian, and TransUnion. If you are using a secured credit card for the purpose of establishing or improving your credit score, be sure to confirm that the credit issuer will report your activity to these 3 credit reporting bureaus. 

Keep in mind that using your secured credit card over time, will also boost your length of credit history, which makes up 15% of your FICO® Score. So if you use a secured credit card responsibly, you can build up your credit score and potentially upgrade to a traditional credit card in the future.

Tips for choosing the best secured credit card

There are several secured credit cards out there for people who are looking to build credit, but not all secured credit cards are created equal. Before you start applying, take some time to research your options.

Here are a few things to keep in mind when you are shopping for secured credit cards.

  • Lower interest: While interest rates on secured cards are generally higher than those on unsecured cards, it’s still worth shopping around for the best rates. And always remember that you can avoid interest altogether if you pay your balance in full every month.
  • Competitive fees: You can save money by comparing different cards to find the best deal when it comes to fees. Ideally, you would go with a secured credit card that doesn’t charge any miscellaneous fees. Look for no annual fees, application fees, processing fees, or foreign transaction fees.
  • Affordable deposit: Most secured cards have a minimum security deposit of $200 or $300, but some require as much as $500. Shop around to secure the least expensive option.
  • Rewards: Some secured credit cards offer rewards, such as cashback, miles, or points. But keep in mind that the low credit limits on secured cards make it hard to rack up significant rewards; however, if you shop around, you might find some that do.
  • Easy upgrade: Ideally, you’ll be able to move up to an unsecured card from the same issuer and get your deposit back without having to close the account.


How do I get a secured credit card with bad credit?

One of the most significant advantages of a secured credit card is that people with poor credit or no credit history at all can still apply for a secured credit card. With a secured credit card, all you have to do is pay a cash deposit that will serve as a safety net if you are ever late on your payments. Keep in mind that some card companies will deny you a secured card if you have a history of bankruptcy or foreclosure.

How much should I put on a secured credit card?

The minimum and maximum amount you can deposit onto a secured credit card vary by issuer, but in general, you should be prepared to pay a deposit of at least $200 for a secured card.

The amount you decide to deposit will depend on multiple factors, such as how much you can realistically afford to set aside, what you want your credit limit to be, and your credit utilization. Aim for depositing an amount that allows you to have a low utilization ratio. Credit scoring models tend to penalize utilization over 30%, so if your credit limit is $200, you won’t want your balance to exceed $60.

How long should I keep a secured credit card?

It’s important to remember that the longer your account stays open, the longer your credit history grows, which can help your credit score. A good rule of thumb is to keep your secured credit card account open until you are fully ready for an unsecured card.

Try applying for an unsecured credit card to see if you qualify. If you don’t, you may want to hang on to the secured card and continue to work on improving your credit score. Make sure to monitor your credit report and score regularly.

How much will a secured credit card raise my score?

It’s hard to say precisely how much a secured credit card will raise your credit score or how fast your score will improve.

Assuming you pay your bills on time and maintain a low credit utilization rate, you can expect to see improvements in your credit score after about six to 12 months. And if you start with a bad credit score, you can expect to qualify for an unsecured credit card for fair credit within 12 to 18 months.

Chime’s secured Credit Builder Visa® Credit Card users can see an average 30-point increase in their credit score over eight months.2

How do I make the switch from a secured credit card to an unsecured one?

In some cases, your credit card issuer will automatically transition you to an unsecured credit card after you’ve proven you can use your secured credit card responsibly. This is the best-case scenario because it doesn’t require you to open a new account. 

If your credit card issuer doesn’t automatically consider you for an unsecured credit card, you’ll need to close out your secured credit card before you can receive your security deposit back, and you’ll most likely need to apply for an unsecured credit card on your own.

Final thoughts

A secured credit card can help improve your credit — but only if the credit bureaus are tracking your card activity. So, make sure your card activity is reported to all 3 of the credit bureaus — TransUnion, Equifax, and Experian.

While you’re at it, order a credit report. You can order one for free at each of the 3 bureaus every 12 months. 

And, remember this: A secured credit card can help improve your credit — if you use it responsibly. 

Chime Credit Builder Secured Visa® Credit Card

  • Build credit safely
  • No credit check to apply
  • No annual fees
  • No interest~
Get Started

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