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Secured credit cards: What to know

Initial deposit
Initial Deposit

Generally speaking, the deposit amount is up to the consumer. According to Sklar, a few hundred dollars is typical for a deposit, and it's unusual for an issuer -- or a consumer -- to go beyond $1,000, at least when first applying for the card.

Although the deposit is theoretically the credit limit, McGrigg says consumers need to look out for products that set the limit above the collateral. Sometimes, says McGrigg, issuers will extend $1,300 of credit on a $1,000 deposit. That may sound like a nice offer, but McGrigg cautions that consumers using secured cards have probably had some credit trouble and might not want the higher limit.

Consumers trying to improve their credit scores typically do well going with a limit of between $300 and $500, says Sanford, because that's an amount they should be able to pay off each month.

"If the cardholder wants to raise the limit, they should talk to the bank about increasing their deposit," says Sanford.

As for the deposit money, it is possible to earn interest on your collateral, says Sklar, but consumers shouldn't expect much.

"Interest on the deposit works just like a savings account," Sklar says.


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