Secured credit cards can be an excellent option for those who are looking to establish or rebuild credit. Unlike a traditional credit card, with a secured card the person must first make a deposit, which acts as collateral, before they can start using the card. This deposit acts as a safety net for the issuer, ensuring that they will be reimbursed in the event that they are unable to pay the credit card bill. While this may seem like a downside, they can help build a better credit score over time.
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Data for today’s episode is provided by Javelin Strategy & Research’s Report: Secured Card Market in 2022
Credit score changes by account status over two years
- Open accounts had a change in score of +24
- Closed accounts with balance had a change in score of -42
- Closed accounts without a balance had a change in score of -46
- Write offs had a change in score of -60
About Report
This report provides an overview of the secured credit card market in the United States. Secured cards are a type of credit card that requires a security deposit—used as collateral by the bank—to establish the initial credit limit. These products are marketed toward credit invisible, thin files, and those with a subprime credit score to build a credit history. Issuers typically reward good credit behavior on the secured card by graduating the cardholder into an unsecured card product and refunding the initial security deposit.
The market for secured card products is competitive, and many financial institutions offer similar product features. This report primarily focuses on offerings from large banks and credit unions in the consumer market, but we also examine the small market for small business secured cards. Fintechs have also gained market share within the secured card market, and we look at numerous credit-builder offerings. Credit card as a service (CCaaS) vendor offerings and private-label services are also included.
