If you’re trying to rebuild your credit, choosing between a secured and unsecured credit card can feel confusing. Both can help you boost your credit score if used responsibly, but they work very differently. In this guide, we’ll explain the difference, how each one affects your credit, and which one may be better for you based on your current situation.
What Is a Secured Credit Card?
A secured credit card is a type of credit card that requires a refundable security deposit to open. This deposit acts as your credit limit. For example, if you deposit $300, your credit limit will usually be $300.
Why It’s Useful for Credit Repair:
- Easier Approval: Even with bad or no credit, you’re likely to get approved.
- Reports to Credit Bureaus: Most secured cards report your payment activity to all three major credit bureaus—Experian, Equifax, and TransUnion.
- Low Risk for Lenders: Since you’re putting down a deposit, the lender takes on less risk and is more likely to approve your application.
Examples of Popular Secured Cards:
What Is an Unsecured Credit Card?
An unsecured credit card does not require any upfront deposit. Instead, the credit card company gives you a credit limit based on your credit history, income, and credit score.
Why It’s Useful for Credit Repair:
- No Deposit Needed: You don’t need to tie up money in a security deposit.
- Can Grow With You: Some cards are designed for people with poor or fair credit and offer credit limit increases as your credit improves.
- Rewards & Perks: Some unsecured cards offer cashback or travel points, even for those with lower credit scores.
Examples of Unsecured Credit Cards for Poor Credit:
- Credit One Bank® Platinum Visa® for Rebuilding Credit
- Milestone® Mastercard®
- Indigo® Platinum Mastercard®
Main Differences: Secured vs. Unsecured
| Feature | Secured Credit Card | Unsecured Credit Card |
|---|---|---|
| Deposit Required | Yes | No |
| Approval Rate | High (good for poor credit) | Lower (depends on credit score) |
| Initial Credit Limit | Equal to deposit | Based on creditworthiness |
| Credit Building | Yes | Yes |
| Rewards | Rare | Sometimes |
| Upgrade Option | Yes (some cards graduate to unsecured) | Yes (credit limit increases) |
Pros and Cons of Secured Credit Cards
Pros:
- Great for people with bad or no credit
- Almost guaranteed approval
- Builds positive payment history
Cons:
- Requires an upfront cash deposit
- Low starting credit limits
- Usually no rewards
Pros and Cons of Unsecured Credit Cards
Pros:
- No deposit needed
- Potential to earn rewards
- Can grow your credit limit over time
Cons:
- Harder to get approved with poor credit
- High APRs and fees if your credit is low
- Missed payments hurt your score more
Which Is Better for Credit Repair in 2025?
If you’re starting from scratch or recovering from a low credit score (under 580), a secured credit card is usually the best place to start. It’s safe, low-risk, and helps build positive payment history.
Once your score improves—often within 6 to 12 months—you may become eligible for an unsecured card. Some secured cards even allow you to graduate to an unsecured version and get your deposit back.
However, if your score is already in the fair range (580–669), you might qualify for a low-limit unsecured credit card right away, avoiding the need for a deposit.
How to Use Any Credit Card to Repair Your Credit
- Pay on Time: Your payment history makes up 35% of your credit score.
- Keep Utilization Low: Try to use less than 30% of your credit limit.
- Don’t Max It Out: High balances can hurt your score.
- Avoid Late Fees: One late payment can stay on your report for up to 7 years.
- Check Statements Monthly: Stay on top of all charges and due dates.
Tips Before Applying
- Check Your Credit Score First: You can use Credit Karma or AnnualCreditReport.com to check your score for free.
- Compare Fees: Some cards charge annual fees or high interest rates.
- Look for Graduation Offers: Choose a secured card that lets you upgrade to unsecured after several months of on-time payments.
Secured Cards That Graduate to Unsecured
| Card Name | Graduation Timeframe | Annual Fee |
|---|---|---|
| Discover it® Secured | 7 months | $0 |
| Capital One Platinum Secured | 6 months | $0 |
| Navy Federal nRewards® Secured | 6 months | $0 |
Frequently Asked Questions
Q: Can I have both secured and unsecured cards at the same time?
Yes, you can. In fact, having multiple cards can help improve your credit mix, which is good for your score.
Q: Will closing a secured card hurt my credit?
Yes, if it’s your only card or your oldest account. Always make sure your credit score won’t drop before closing any card.
Q: How fast can a secured credit card improve my score?
Many people see improvement in 3 to 6 months if they use the card wisely.
Q: Do secured credit cards charge interest?
Yes, if you carry a balance. But if you pay in full each month, you avoid interest charges.
In conclusion, Start with a secured credit card if your credit is very poor or nonexistent. Use it responsibly. Once your score improves, apply for an unsecured card or ask to graduate. Both types of cards can help you fix your credit, but they serve different purposes depending on where you’re starting from.
Looking for the right secured card to start? Consider the Discover it® Secured — no annual fee, cashback rewards, and credit bureau reporting.