Secured cards are a type of credit card that require a security deposit as collateral. Secured cards are designed for individuals with limited or poor credit history, providing them with an opportunity to build or rebuild their credit. To open a secured card, the cardholder must provide a refundable security deposit, which usually determines their credit limit.
The security deposit acts as a safeguard for the card issuer, reducing the risk associated with lending to individuals with less established credit histories. It also allows cardholders to demonstrate responsible credit behavior and improve their creditworthiness over time.
