Credit Builder Secured Credit Cards and How They Work

A man and woman sign up for a secured credit card.

Are you seeking to establish or strengthen your credit? Secured credit cards could be the solution you are looking for. Frequently regarded as the best card to build credit, this financial tool provides a route to improving your financial standing. But what is a secured credit card and how does it work?

Let's lay the foundation for understanding secured credit cards and their role in paving the way toward a more secure financial future.

What are Secured Credit Cards?

Similar to conventional unsecured credit cards, a secured credit card operates with some distinctions. Secured credit cards are often called “credit builder cards,” and they are backed by a cash deposit from the cardholder, which serves as collateral on the account. This deposit allows the lending bank or credit union to recover funds in case the cardholder defaults on payments. Essentially, this deposit serves as a form of financial insurance for the lender, mitigating risk.

The credit limit on your credit builder card is determined by the amount you deposit to "secure" the account; for instance, a $700 deposit results in a $700 credit limit.

Secured credit cards are designed for individuals with limited or damaged credit, providing them with a means to improve their credit scores or start a credit history. They represent a practical choice for those aiming to enhance their financial position and access credit options.

The Purpose of Secured Credit Cards

Let's explore the rationale behind secured credit cards. Much like other loan products, credit card issuers assess past credit history to determine eligibility and set interest rates. A good or great credit score typically translates to the best offers, as it signifies a reduced risk of delinquency. However, individuals with little or no credit history, or “suboptimal credit,” may encounter hurdles in securing approval for a credit card.


This is where secured cards come into play. Lenders are more inclined to greenlight applicants for a secured credit card due to its reduced risks. Specifically, the initial deposit acts as a safeguard for the lender in the event that the cardholder fails to make timely payments.

How do Secured Credit Cards Work?

Applying for a secured credit card is just like applying for any other card, typically through a bank or credit union. Each financial institution may offer cards from different payment networks, such as Visa and Mastercard. When obtaining a secured credit card, the cash deposit you provide sets your credit limit, representing the maximum amount you can charge on the card.

Credit limits for credit building cards can vary widely, typically ranging from a few hundred dollars to several thousand, depending on card regulations and your ability to set aside funds. Secured credit cards require a deposit to serve as collateral for opening the account; it then is reserved for when you make your payments. This makes it different from other types of credit cards, such as traditional credit cards, with a revolving line of credit.

With your secured credit card in hand, you can utilize it in the same manner as any other credit card, making purchases and payments. As you use your secured credit card responsibly, you'll pave the way to improving your credit score. “Responsible” credit behavior includes regularly paying your balance on time and managing your credit with care, ultimately helping you build a positive credit history over time.

Credit building cards often serve as stepping stones to qualify for different cards in the future. As your creditworthiness improves, you may become eligible to transition to an unsecured card. When or if you decide to make the transition or choose to close your account (while it remains in good standing), you may receive your deposit back, provided your balance is fully settled.

How to Build Credit Fast

Looking to accelerate your credit-building journey? Look no further. The best secured cards will automatically report your payments to major credit bureaus, guaranteeing that your responsible financial behavior receives recognition across the board.

Fortunately, Armed Forces Bank's Credit Builder Secured Visa® Credit Card does just that. With automatic reporting to Equifax, TransUnion, and Experian, your efforts to strengthen your credit profile won't go unnoticed. Here's what you can expect from the Credit Builder card:

  • Customize your credit limit, ranging from $300 to $3,000
  • No more annual fees, application fees, and over-limit fees
  • Enjoy added security with EMV chip technology
  • Experience faster, more secure online transactions with Visa® Checkout
  • Benefit from automatic reporting to all three major credit bureaus

Furthermore, Armed Forces Bank equips you with valuable credit tools, including expert advice on best credit practices and financial calculators to help you assess and manage your credit effectively.

Ready to take the first step toward building credit? Apply for a secured credit card today!



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Subject to credit approval. Transaction and Penalty fees apply.  Credit Builder Savings account required. $5.00 quarterly fee charged to the Credit Builder Savings account if not enrolled in eStatements. Improved credit score is not guaranteed. Credit score is determined by credit reporting agencies based on multiple factors, but satisfactory performance on a credit card product can improve your credit score. Default on a credit card, including missed or late payments can damage your credit score. Once added, funds cannot be withdrawn from the Credit Builder Savings account and the Credit Builder credit card without closing the savings account and the credit card.