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Secured Credit Cards: How They Work

Credit cards in India are available in wide varieties. However, not all of them are accessible. If your credit score is below the ideal score and you do not have a good credit history, it might seem impossible for you to get a credit card. 

Fortunately, there is one kind of credit card for which you don’t need a good credit score.

People with bad credit have the chance to repair their credit, learn credit card usage habits, and gradually build up their trustworthiness with a secured credit card.

Cash deposits support this type of credit card. They are also known as secured credit cards. 

These are good options if you are just getting started and need to build a good credit history. Later this good credit history can help you get unsecured credit cards.

A Secured Credit Card: What Is It?

Card issuers provide a secured credit against the deposit of the customer.

And the amount is referred to the issuer as a security deposit. The credit card issuer maintains it while the credit account is open.

Secured credit cards in India might be a fantastic option for people starting over, improving their credit, or rebuilding it.

How Secured Credit Cards Work?

Secured credit cards are designed specifically for those with low or no credit scores. A standard credit card works by charging you certain interest rates and then giving you access to funds once a month. Acceptance for a secured card is not assured as for any other credit card type. 

Depending on the credit card company, different secured credit cards have varying requirements and criteria. There can be more approval criteria than just a security deposit. Once you have your secured credit card, it is time to make the deposits. 

You can spread out the funding of your deposit with some card issuers. Others could demand upfront payment in full. Now that you have deposited the necessary funds, it is time to use your new secured credit card. 

Once you have been approved and paid your deposit, a secured credit card functions precisely like a standard, unsecured credit card; you may use the card to make transactions both offline and online. Deposits are frequently reimbursed. However, depending on the issuer, the return procedure and timing might differ.

Potential Benefits Of a Secured Credit Card

A few advantages of these credit cards are:

  • When you apply for a secured credit card, you must deposit cash. Using this, the card issuer can keep the deposit if you don’t make payments on time.
  • A secured card is a fantastic method to establish your credit history.
  • Unsecured credit cards may be difficult if you have no credit history. However, you can obtain secured cards if you have some credit history or no history.
  • Since secured credit cards require a security deposit, you are not likely to miss any payments and thus create a poor history on your report. 

Once you have a good credit score, you may experience no difficulties getting approved for a low-interest Personal Loan. 

  • If you pay the bills on time on your secured credit card, you will build a good credit score, allowing you to easily get an unsecured credit card. 

What Is The Difference Between Secured & Unsecured Credit Cards?

Similar principles govern both an unsecured and secured credit card. The security deposit separates a secured credit card from an unsecured credit card. However, with secured cards, the number of benefits like miles, cashback, or points may also be restricted.

Also, possible variations in credit limitations might occur with secured credit cards. The security deposit could determine your credit limit with a secured card. However, certain secured credit cards allow you to raise your credit limit.


Examine the terms and conditions thoroughly before applying for a secured credit card. Learn what is being charged for and how much interest will accrue. 

Understand the annual percentage rate and whether there will be a penalty for paying off the balance early. When comparing credit cards, you need to carefully consider their features and fees and how much risk they pose. 

Some secured credit cards have rewards programs tailored to specific cardholders, such as airline miles, cash back, or travel packages.

Read more blogs – knowproz

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