How to build credit with a secured credit card

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Summary

• A secured credit card is one of the most direct ways to build credit or rebuild credit when you don't yet have the credit history or creditworthiness a traditional credit card requires.

• Opening one means putting down a cash deposit, called a security deposit, which becomes your credit limit and acts as collateral with your credit card issuer.

• Using it well comes down to on-time payments and a low credit utilization ratio, since those two habits move your FICO® Score more than anything else.

• Your card issuer typically reports your activity to the three major credit bureaus, TransUnion, Experian, and Equifax, so responsible use becomes a positive credit history on your credit report.

• Cards like the OnePay Builder Card follow the same basic path but skip the separate cash deposit, tying your credit limit to your checking balance instead, while having no monthly fee. 

If you're starting from scratch or working to rebuild credit, a secured credit card gives you a clear, step-by-step way to build credit. This guide walks through the process end to end: deciding if it's the right move, applying, using the card, and eventually moving on to an unsecured credit card. For a closer look at how these cards compare to other credit-building tools, see our guide to credit builder cards. Here, the focus is on the steps themselves.

Step 1: Decide if a secured credit card is right for you

A secured credit card tends to make sense if you don't have enough credit history yet to qualify for a traditional credit card, or if you're working to rebuild credit after some rough spots. Approval for an unsecured credit card is based mostly on your existing creditworthiness, but a secured card uses your own money as collateral instead, so it's accessible even with thin or damaged credit. 

If you'd rather not open a new account at all, becoming an authorized user on a family member's or friend's card is another way to start adding positive history, though you won't control the spending or payments yourself.

Step 2: Apply and set up your account

Applying for a secured credit card usually looks a lot like applying for any other card, but instead of being approved purely on your credit report, you'll put down a cash deposit, often called a security deposit. That deposit becomes your credit limit, so a $300 deposit typically means a $300 credit limit, and it gives your credit card issuer collateral in case you don't pay your balance. 

Some issuers offer a refundable security deposit, meaning you get it back once you close the account in good standing or move to an unsecured credit card.

Not every secured card works this way. The OnePay Builder Card, for example, is a secured credit card at its core, but instead of asking for a separate cash deposit, it ties your spending power credit limit to your existing checking balance. That means there's no deposit to save up for and no deposit to wait on getting back later, and it comes with no monthly fee, no interest, and no credit check.

Step 3: Compare costs before you commit

Before you apply anywhere, it's worth reading the fee page closely. A few cost-related words come up on almost every card.

• Interest rates, expressed as a variable APR (annual percentage rate), apply to any balance you carry past the due date. Rates on secured cards can run higher than rates on many unsecured cards.

• An annual fee is a yearly charge for having the card open. Not every card charges one, so it's worth comparing before you apply.

• A cash advance happens when you use the card to withdraw cash instead of making a purchase. It often comes with its own fee and a higher rate that starts right away.

• A balance transfer fee applies if you move debt from another card onto this one, usually a percentage of the amount transferred.

• Late fees can apply if you miss your due date, on top of the hit to your payment history.

Step 4: Use the card the right way each month

Once your account is open, two habits determine whether the card actually helps your credit. The first is payment history, meaning whether you pay on time. On-time payments carry more weight than any other single factor in your FICO® Score, so pay at least the minimum payment by the due date every month, ideally the full outstanding balance so you avoid interest altogether.

The second is your credit utilization ratio, sometimes called your credit utilization rate. It compares what you owe to your total credit line, so try to keep your balance well below your available credit, generally under about 30 percent of your limit. If your card earns rewards, redeeming them as a statement credit or cash back doesn't affect your credit building, but it's a nice bonus for using the card the way you were going to anyway.

Step 5: Track your progress

Most secured card issuers report your account each month to one or more of the major credit bureaus. Over time, that reporting is what helps turn responsible use into a positive credit history on your credit report. Keep in mind that certain transactions may not be reported, and reporting is subject to your issuer's terms.

Ask upfront whether your issuer reports to all three major credit bureaus, TransUnion, Experian, and Equifax, since some report to only one or two. Checking your credit report and credit score every few months lets you see that progress and catch any errors early.

Step 6: Know when to graduate

After months of on-time payments and low balances, many secured card issuers will offer to refund your deposit and convert you to an unsecured credit card automatically. Others expect you to apply for a traditional credit card of your choice once your credit score has improved. Either way, there's no need to rush into a lot of new credit at once, and it's often worth giving your secured card some time before closing it, since closing your oldest account can shorten your credit history.

A few extra habits that help

Setting up account alerts for your due date and balance can help you catch a payment before it's late. Budgeting for your card payment the same way you budget for rent, gas or groceries keeps things predictable, and small, steady habits like these are what boost your credit score over time—results may vary.

Ready to get started?

If you're ready to apply, the OnePay Builder Card follows the same steps above but skips the separate security deposit, tying your credit limit to your checking balance instead. Check the app to see if it's available for your account.