Secured Credit Cards

Secured credit cards are common in the United States, Canada and other parts of the world. They give people a way to build or improve credit history by offering access to credit in exchange for a cash deposit or other security.

In Australia, all credit cards are unsecured accounts. But there are some alternatives you can consider if you want to build credit or increase your chance of approval.

What is a secured credit card?

Secured credit cards give people access to credit when they provide a cash deposit, linked savings account or other asset. This "security" helps reduce the risk for lenders and can help people build or improve their credit history.

Similar to other credit cards, you get a regular statement and need to pay at least the minimum amount. Interest charges also apply to any unpaid balance on the card. But if you missed a repayment or defaulted on a secured card, the lender could use part of the security to recover the debt.

Features of a secured credit card

• Credit limit. A secured credit card is a line of credit from a bank. A cash deposit of your own money is typically used as a security. The financial institution then issues a credit limit based on the size of the deposit. It's typically relatively low to start with (e.g. $100 or $200).
• Security. The security is held in an account by the credit card provider for a period of time (18 months for example). The security deposit does not earn interest.
• Interest-free days. Get up to 25 days interest free on your card purchases when you pay back the card balance by the statement due date.
• Interest charges. Interest charges apply on any balance you have not paid by the statement due date.
• Credit tracking. The credit card provider will send reports to credit agencies about your repayment history.

Alternatives to secured credit cards in Australia

Depending on why you want the account, here are some options you could consider on the Australian market:

• Secured loans
  A secured personal loan lets you borrow a set amount of money over a fixed term. Similar to a secured credit card, the loan's value is tied to an asset, such as a car, home or even savings you have in a term deposit account. This security means lenders may consider people with bad credit or casual employment.
• Low-limit credit cards
  The secured credit cards that are offered overseas typically have low credit limits. In Australia, there are cards with minimum credit limits between $500 and $2,000 that could help you manage repayments. Just keep in mind that you typically need to have good credit history and a regular income to get a credit card.
• No interest, flat fee credit cards
  These credit cards don't charge interest and have a flat monthly fee instead, similar to buy now pay later (BNPL). But unlike most BNPL accounts, these cards add to your credit report and can help build up credit history. So the account structure and relatively low credit limits offered on these cards make them another alternative to a secured card. They also have low credit limits.
• Short-term loans
  Also known as payday loans, short-term loans allow you to borrow amounts up to around $2,500. They typically offer easier approval options for people with poor credit history compared to other types of credit. But they can also have very high fees that may increase the risk of debt (which could hurt your credit score).
• Credit repair
  If your aim is to rebuild credit, a credit repair agency may be able to help by removing default listings from your credit file if there's been an error in the creditor's reporting process.
Tip: Finder's guide on bad credit and credit cards has more tips and insights if you're interested in a credit card for improving your credit score.

Finder survey: How satisfied are Australians with their experiences with personal loans?

How does a secured credit card compare to a secured home loan?

You can compare the differences between these two lines of credit below:

US secured credit card providers

• Capital One Secured Mastercard
• First Progress Platinum Elite Secured Mastercard
• First Progress Platinum Prestige Secured Mastercard
• USAA Secured Platinum Card
• Citi Secured Mastercard
• Wells Fargo Secured Visa Card
• Bank of America Secured Credit Card

Frequently asked questions

Written by

Amy Bradney-George

Editor

Amy Bradney-George was the senior writer for credit cards at Finder, and editorial lead for Finder Green. She has over 16 years of editorial experience and has been featured in publications including ABC News, Money Magazine and The Sydney Morning Herald. See full bio

Amy's expertise

Amy has written 588 Finder guides across topics including:

• Credit cards
• Frequent flyer
• Credit score
• BNPL
• Money management
• Sustainability

Co-written by

Sally McMullen

Producer

Sally McMullen was a creative content producer at Finder. Sally wrote about credit cards for almost 5 years, authoring almost 900 articles on Finder alone. She has also been published in Yahoo Finance, Dynamic Business, Financy and Mamamia, as well as Music Feeds and Rolling Stone. Sally has a Bachelor of Communication and Media Studies majoring in Journalism (Hons) from the University of Wollongong. See full bio