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Secured credit cards are great for people who need to repair their credit history, who have bad credit history or no credit history at all. But their benefits are limited, and they offer minimal long-term value.
A secured credit card usually has a low credit limit equal to the security deposit that the card issuer requires from applicants and rarely offers rewards.
Unsecured cards do not require collateral. The issuer provides the cardholder with a line of credit and charges interest and fees if they repay their balances late. You can make purchases or accumulate credit with both secured and unsecured cards.
When you use secure cards responsibly, it can boost your credit score by establishing a positive payment history, paving the way to “switching” to an unsecured card at the same bank. And that could mean a higher credit limit, more perks, and a chance to reap the rewards. In addition, you can return the deposit.
Keep reading to learn more about switching from a secured to an unsecured credit card.
The best secure cards you can upgrade
If you’re looking for an insecure card that you can eventually upgrade to insecure, you have options:
Discover Secure Credit Card
Why did we choose thisA: If you have a Discover it® secured credit card, the issuer reviews your account starting with seven months of on-time payments to see if you can move to an unsecured line of credit and get your deposit refunded. Bonus: With this card you can earn rewards.
pros
- No annual fee
- Credit limit up to $2,500
- No fees for foreign transactions
- Two percent cashback at gas stations and restaurants (on purchases up to $1,000 per quarter); 1 percent cashback on other purchases
Minuses
- High annual interest rate: 24.49 percent (variable)
Who should apply: Those who like to travel all over the world can benefit greatly from this card due to the fact that you don’t have to pay foreign transaction fees. If you want to be rewarded, this might be the right choice for you.
Who should missA: Anyone who thinks they can end up carrying the balance should probably look elsewhere.
Capital One Platinum Secured Credit Card
Why did we choose thisA: With a Capital One Platinum secured credit card, you don’t have to worry about paying an annual fee, which reduces stress if it takes a little longer to switch to an unsecured card. Although there is no official policy regarding switching to a secure card, some users report success after the first year.
pros
- Increase in credit limit after six timely payments
- Low fees
- Low bail bond
Minuses
- No clear path to transition to secure card
- No awards
Who should apply: This choice will appeal to those who do not want to pay an annual fee.
Who should missA: If you’re in a hurry to switch to an unsecured credit card, this is probably not the best option for you. If you really want to get rewarded, look for another card.
Citi Secure Mastercard
Why we chose it: You can upgrade to an unsecured card after 18 months of on-time payments to a Citi® Secured Mastercard®.
pros
- No annual fee
- Credit limit up to $2500
Minuses
- No awards
- High annual interest rate: 23.99 percent (variable)
Who should applyA: Consumers who need higher credit limits can receive up to $2,500 on this card.
Who should miss: Those who want to receive a reward should look elsewhere.
What to do if your secure card is not clear about updates
Not all secure card issuers automatically verify an account in order to transfer it to an insecure card, but you can often request an upgrade. You will most likely be lucky if you make timely payments within six months or a year.
By sticking to your issuer and choosing a different card, you can choose a card with a better reward, a higher credit line, or a lower interest rate. Also, in some cases, staying with the same issuer means no new application and no credit check, which means no impact on your credit score.
You can also find unsecured card offers from other issuers. Because the issuer shares your secure card payment history with the three major credit reference agencies, they can use this information to assess your creditworthiness. Good places to start are unsecured cards meant for people with bad credit or checking prequalified offers to make sure you have a good chance of being approved.
Increase your chances of winning an unprotected card
Whether you’re trying to switch to an unsecured card or apply for a new one, there are a few basic steps you can follow to improve your credit score and increase your chances of approval, such as:
- Pay on time every time.
- Keep your credit utilization ratio low if possible.
- Stay within the deposit limit.
- Keep track of your credit score and other accounts.
- Pay off all your debts, including loans and other credit cards.
- Consider increasing your deposit amount to increase your available credit.
- Make payments in excess of the minimum amount.
bottom line
For people with bad credit, secured credit cards can help you back up and create a positive payment history.
Once your credit score improves, it will be possible to upgrade to an unsecured card that can offer you more benefits, including lucrative rewards such as cash back, points and miles. Being responsible for your payments and your credit score is the fastest way to unlock the best card option.
Editorial disclaimer
The editorial content on this page is based solely on the objective judgment of our contributors and is not based on advertising. It was not provided or ordered by credit card issuers. However, we may receive compensation when you click on links to our partners’ products.