A brass padlock resting on credit cards to illustrate payment security and financial protection.

Secured credit cards are powerful financial tools designed for people who want to build or rebuild their credit. Unlike traditional credit cards that rely on your credit history to determine your borrowing limit, secured credit cards are backed by your own money through a security deposit.

However, they shouldn’t be confused with prepaid debit cards. Secured cards still help you build credit and earn other benefits typically associated with credit cards.

At People's Community Federal Credit Union, we believe everyone deserves access to financial tools that help them achieve their goals. That’s why we offer a credit union secured credit card designed with our members’ success in mind.

How Do Secured Credit Cards Work?

On the surface, secured credit cards may sound a lot like a prepaid debit card. So how exactly do they work, and what allows them to function as a credit card if they are backed by your money?

Secured credit cards work by requiring an initial security deposit, and then granting you a credit limit if approved. Instead of your money immediately going onto the card like with a prepaid debit card, it prevents you from getting into debt.

Once you are approved, your secured credit card can then be used for things exactly like a regular credit card. You will still need to make monthly payments to cover the balance, which is how these cards are able to build credit. Your security deposits are also refundable once you decide to close the account.

The Secured Card Process

  1. Apply for the card through a trusted credit union, like People’s.
  2. Make your security deposit once approved.
  3. Receive your credit limit, which is typically equal to your deposit.
  4. Use your card for everyday purchases, just like any credit card.
  5. Make monthly payments to cover your balance.
  6. Build credit as your positive payment history is reported to credit bureaus.

Do Secured Cards Build Credit?

Yes! This is one of the primary purposes of secured credit cards, and they’re remarkably effective when used responsibly.

What Should I Look for In a Secured Credit Card?

  • Low or No Annual Fees
  • Reasonable Interest Rates
  • Credit Bureau Reporting
  • Member-Focused Benefits

Key Benefits of Secured Credit Cards

Build Credit with Lower Risk of Debt

Since secured credit cards are backed by your own money, they allow you to establish or improve your credit without the risk of accumulating major credit card debt. Your security deposit acts as a safety net, keeping your spending in check while you develop healthy credit habits.

 

Enjoy Flexible Spending Power

A secured card works exactly like a traditional credit card, giving you flexibility in how you spend. Your secured credit card has you covered when you’re shopping online, paying bills, or handling everyday expenses.

Experience Higher Approval Rates

Because secured credit cards are backed by your deposit, they carry lower risk for lenders. This creates a higher approval rate, even for borrowers with low or damaged credit scores.

Ready to speak about Credit Cards?

Questions about your account or our services? Our Member Services team is standing by.

What’s the Difference Between Secured and Unsecured Credit Cards?

Unsecured Credit Cards:

  • Do not require a security deposit.
  • Credit limit is based on your creditworthiness.
  • Require good to excellent credit for approval.
  • Often offer higher credit limits and more rewards.
  • May have more competitive interest rates for qualified borrowers.

Secured Credit Cards:

  • Require a security deposit that typically equals your credit limit.
  • Designed for building or rebuilding credit.
  • Have higher approval rates due to lower lender risk.
  • May have lower credit limits initially.
  • Ideal for those with limited or damaged credit history.

Who Is a Secured Credit Card Good for?

  • First-Time Credit Users: Young adults, college students, or anyone new to credit can use a secured card to establish their credit history. Starting with a secured credit line helps you learn responsible credit habits without the temptation of high spending limits.
  • Those Rebuilding After Financial Hardship: Life happens. When you’ve experienced bankruptcy, foreclosure, or simply made past credit mistakes, a secured card offers a fresh start.
  • Individuals with Limited Credit History: People who have primarily used cash, or those who have avoided credit in the past may have thin credit files. A secured card helps establish the credit history needed for future financial goals.
  • Anyone Who Wants a Low-Risk Credit Option: Even if you could qualify for an unsecured card, you might prefer the built-in spending controls of a secured card. It’s a great way to enjoy credit card benefits while maintaining strict budgeting boundaries.

Get Started With People's Community Federal Credit Union Today

If you are looking for a safe and easy way to build credit, a secured credit card could be a great option. And getting started is easy with People's Community Federal Credit Union! With five convenient branches throughout Southwest Washington, we can help you get started.

Learn more about our Secured Visa® Credit Card or contact us here with any questions.

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