Definition
Secured Credit Card
A secured credit card is a card backed by a fixed deposit or collateral you pledge, making it easier to obtain and useful for building or rebuilding a credit history.
Because the lender holds a deposit (often a fixed deposit) as security, it carries little risk to the issuer, so it is available to those with no credit history, a poor score, or limited income — students, newcomers and people recovering from defaults. The credit limit is usually a portion of the pledged deposit.
Used responsibly — small purchases paid in full each month — a secured card builds a positive repayment record that can graduate you to a regular card and a better credit score. The pledged FD typically continues to earn interest, so the main cost is discipline, making it a low-risk on-ramp to formal credit.
Related terms
- Debt-to-Income Ratio (Individuals)For individuals, the debt-to-income ratio is the share of your monthly income that goes toward repaying debts such as EMIs and credit-card dues.
- Minimum-Due TrapThe minimum-due trap is the costly habit of paying only the small 'minimum amount due' on a credit-card bill, which keeps you in debt and accrues heavy interest on the rest.
- Credit Report DisputeA credit report dispute is the formal process of asking a credit bureau to correct an error on your credit report, such as a wrong default, a loan you never took, or an outdated entry.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.