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You’ve qualified for a secured credit card, a smart way to build your credit history or repair your damaged credit score. Now you face a choice: How much money should you deposit with the bank or financial institution behind your card?
This is an important decision. The money you deposit with a secured credit card serves as your card’s credit limit. For example, if you deposit $500, your card’s credit limit will also be $500, and you won’t be able to charge more than this amount. This doesn’t mean that you should make as large of a deposit as possible, though. The right deposit amount for you depends on two key factors:
- Have you built an emergency fund with enough dollars to cover unexpected repairs and expenses?
- Do you plan on using your card to make sizable purchases or are you more interested in repairing your damaged credit or building a credit history?
Featured Partner Offer
Discover it® Secured Credit Card
On Discover's Website
4.2
Forbes Advisor created additional star ratings so that you can see the best card for specific needs. This card shines for this use, but overall the star ratings may differ when compared to other cards.
On Discover's Website
Up to 2% Reward Rate
Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter, automatically. PlusRead More
Welcome Bonus
Cashback Match™
Annual Fee
$0
Regular APR
28.24% Variable APR
Credit Score
New/Rebuilding Credit
Editorial Review
In the secured credit world, the Discover it® Secured Credit Card stands above the competition. With an unlimited 1% cash back rate on all purchases, plus 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter, no penalty APR and no annual fee, we love this card for those who need to rebuild their credit. The matching cash back reward at the end of your first year is a sweet bonus.
Pros & Cons
- No annual fee
- Cash back rewards earning is uncommon for a secured card
- Free FICO score access each month
- Cashback Match doubles cash back rewards earning at the end of the first year
- Bonus category rewards are capped
- Secured cards don’t provide many of the perks unsecured cards do
- Secured cards require refundable deposits
Card Details
- No credit score required to apply.
- No Annual Fee, earn cash back, and build your credit history.
- Your secured credit card requires a refundable security deposit, and your credit line will equal your deposit amount, starting at $200. Bank information must be provided when submitting your deposit.
- Automatic reviews starting at 7 months to see if we can transition you to an unsecured line of credit and return your deposit.
- Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter, automatically. Plus earn unlimited 1% cash back on all other purchases.
- Discover could help you reduce exposure of your personal information online by helping you remove it from select people-search sites that could sell your data. It’s free, activate with the mobile app.
- Get an alert if we find your Social Security number on any of thousands of Dark Web sites. Activate for free.
- Terms and conditions apply.
Intro Offer: Unlimited Cashback Match™ - only from Discover. Discover will automatically match all the cash back you've earned at the end of your first year! There's no minimum spending or maximum rewards. Just a dollar-for-dollar match.
Credit Score ranges are based on FICO® credit scoring. This is just one scoring method and a credit card issuer may use another method when considering your application. These are provided as guidelines only and approval is not guaranteed.
How Much Should You Deposit?
Most credit card providers require that you make a deposit of at least $200 when taking out a secured credit card. There are exceptions, though. If your credit is strong enough, you might qualify for a credit limit of $200 for an initial deposit of $49 or $99 with the Capital One Platinum Secured Credit Card, for example.
Maximum deposit amounts vary by card issuer, too. With the Discover it® Secured Credit Card, you can deposit as much as $2,500. So when should you deposit an amount closer to your card’s maximum allowable deposit and when should you aim closer to your card provider’s minimum requirement?
Reasons To Consider a Smaller Despot
First, consider your financial situation. You need an emergency fund that you can draw from to cover unexpected financial emergencies, anything from a new transmission for your car to a large medical bill.
Financial experts recommend that your emergency fund have enough to cover three to six months of daily living expenses. Building this fund should be a financial priority. If you haven’t, consider depositing a smaller amount with your credit card provider. This will free up more money that you can use toward building an emergency fund.
Look at how much money you have in your savings accounts, too. If your accounts are nearly empty, and you need most of the money you earn to cover daily living expenses, consider putting down a smaller deposit. You need to be certain that you can cover your daily bills. That should be a priority over scraping together the largest deposit.
Next, consider your goals for your new secured credit card. Do you want it mainly to improve a weak credit score or to build a credit history? If so, you don’t need a large deposit. You only need to make small purchases through the month and then pay them on or before your card’s due date to steadily improve your credit score and history.
Reasons To Consider a Larger Deposit
If you want to use your secured card to make bigger purchases during the month, you might make a larger deposit. With a smaller deposit, you’ll have a lower credit limit, which might make it impossible to make many larger purchases.
A larger deposit may make sense if you’ve already built an emergency fund and you have enough money saved so that you can comfortably cover your bills and daily living expenses. If you have this financial cushion, you can spare more dollars for a secured card deposit.
Be careful, though. No matter how much you deposit, only charge what you can afford to pay off in full each month. Not doing this can hurt the credit score that you are trying to improve.
One of the most important factors in determining your credit score is your credit-utilization ratio, a measure of how much of your available credit you are using. The less of your credit that you are using, the better it is for your credit score.
If you have a low credit limit—say $500—it’s easy to eat up much of it with your monthly purchases. For instance, if you are carrying a balance of $250, you are using 50% of your available credit, a high amount and one that will hurt your credit score. It’s best, then, to pay off your entire credit card balance on or before your due date. Most credit experts recommend keeping your utilization below 30%.
What Is a Secured Credit Card?
A secured credit card works like a traditional card: You can use it to make purchases each month. If you pay off your balance in full each month, you won’t be charged interest on these purchases. If you carry a balance past your due date, the bank or financial institution that issued your card will charge you interest on the amount you owe.
Secured cards, though, require that you make a deposit with the bank or financial institution offering it. The amount you deposit will serve as your credit limit. If you deposit $300, that’s your credit limit. If you deposit $1,000, that amount will be your limit. You won’t be able to charge more than this limit.
Traditional unsecured credit cards don’t require consumers to deposit any money. Instead, their cards’ credit limits are based on their credit score and reports: The stronger their credit, the higher their credit limits typically are.
You might think of this deposit as an inconvenience. But it makes it easier for consumers with low credit scores or little or no credit history to qualify for credit because it serves as a guarantee to issuers, which incentivizes them to give credit to those with lower scores. If you stop making your payments, your bank or financial institution can use the money you owe from your deposit to cover the charges. This eliminates the risk that banks would normally face when providing credit to cardholders who might have a history of late or missed payments. It’s why many consumers turn to secured cards to rebuild their damaged credit: They can’t yet qualify for traditional unsecured cards.
How Do Secured Cards Help You Rebuild Your Credit?
Secured credit cards are attractive because they can help consumers with low credit scores or no credit history build a stronger credit score.
Every time you make an on-time payment with a secured card, it will be reported to the three national credit bureaus, Experian, Equifax and TransUnion. If you keep making on-time payments, your three-digit credit score will steadily improve.
How many on-time payments you need to boost your score to a higher level varies on where you are starting out. Expect though to make at least six months of on-time payments to see a positive difference in your credit score.
Just make those payments on time. Every payment you make late—30 days or more past its due date—will be reported to the credit bureaus, too. These can cause your credit score to fall by 100 or more points. Late payments remain on your credit reports for seven years.
Pay off your purchases in full each month. Carrying too much debt will hurt your credit score. And if you carry a balance, your card provider will charge you interest on the amount you owe. Interest rates on secured cards are typically high, so carrying a balance could cause your debt to grow quickly.
There’s another reward for making on-time payment. If you make enough of them, your credit card provider might automatically upgrade your secured card to an unsecured one. How many payments you must make varies by card.
If your card provider doesn’t automatically review your account, you can also ask for an upgrade to an unsecured card. Your card provider isn’t required to grant your request, but the longer your record of on-time payments is, the more likely your bank or credit union will be to upgrade your account.
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Bottom Line
There is no one answer to how much of a deposit you should make when taking out a secured credit card. The key is to come up with a deposit that allows you to make the purchases you need each month to steadily boost your credit score while still leaving you with enough savings and emergency fund dollars to cover your daily living expenses and any unexpected financial emergencies.
