If I cancel my secured credit card do I get my deposit back?

do i get my deposit back from a secured credit card

If you get a secured credit card and cancel it, rest easy knowing you do get your security deposit back! 

Credit cards are an essential financial tool that you can take advantage of. More than 175 million Americans have at least one credit card with a balance.1 There are secured and unsecured credit cards. 

If you have a bad FICO score, a secured credit card could help you get a better score. Keep reading to learn more about the secured credit card application process and if you can get your deposit back. 

What Is a Secured Credit Card?

Secured credit cards work similarly to unsecured credit cards. Still, a secured card is more accessible to individuals with unestablished credit or bad credit scores. You receive a credit limit that allows you to make purchases and withdraw cash from an ATM. The only difference is the application process with an addition of a down payment

When you apply for an unsecured credit line, the credit card issuer will pull your credit report. Your credit score determines your eligibility, credit limit, and interest rate. Applicants with a perfect credit score can expect better credit card offers from credit card companies. 

When you apply for a secured credit card account, you need to provide a cash deposit. A secured card deposit lowers the lending risk for the credit card issuer. If a borrower fails to meet the financial requirements, then the lender can keep the deposit.

How Much of a Deposit Do I Need for Secured Credit Cards

Secured credit cards work very well for people with a bad credit score but who want a higher credit line. Secured credit card deposits equal the amount of money you have to spend. Secured cards work similarly to using cash. For example, if you provide a card issuer with $200, your credit line is $200. 

Every credit card company requires a different security deposit amount. Suppose you only have a few hundred dollars to use as a security deposit. In that case, your credit card options may be more limited. However, you can find a credit card company that does not have a minimum security deposit requirement. 

Can I Get a Refund on My Secured Credit Card Deposit?

If you apply for a secured credit card, you will need to use a security deposit. But can you get a secured credit card deposit refund?

Rest assured that any money you use to obtain a secured credit card is usually entirely refundable! But in order to get your money back, you need to either close your credit card account or convert your secured credit card into an unsecured credit card. 

Your credit card issuer may extend an unsecured credit card offer if you prove to be a diligent borrower who has built credit. You can get a higher credit limit and competitive interest rates with an unsecured card. In addition, you could get cash advance loans using your credit card and pay fewer fees with an unsecured card. 

If you want to close your credit card account, you can talk to a bank agent or start your request online. If your account balance is zero, you may close your credit card account quickly. If your account balance is not zero, you will need to pay your monthly bill before your credit card account can be closed. You can typically expect to receive your refundable security deposit in 30 to 60 days. 

Why Use a Secured Card Instead of a Traditional Credit Card? 

A traditional credit card does not require a security deposit, so you may feel inclined to apply for one instead of a secured credit card. But if your credit score is less than ideal, unsecured credit cards may not even be an option for you. When a lender runs a credit check, you may be automatically disqualified. 

Applying for an unsecured credit card is possible. Still, the offers you may receive are likely to be less than ideal. Creditors may offer sky-high interest rates to offset the lending risk of working with a borrower with a bad credit score. Using the credit limit of a new unsecured credit card can be exciting, but the financial risks are higher. 

You Could Build Better Financial Habits

There are plenty of reasons to get a secured credit card. By learning how to manage your finances in a controlled environment, you can build good financial habits and slowly boost your credit score. 

A secured credit card can motivate you to be conscious of your spending. Due to the low credit limits, you may likely use a secured credit card responsibly. Having a higher credit limit can make it harder to manage impulsive spending. You can make better purchase decisions by limiting your budget to a few hundred dollars in your credit card account. 

You Could Improve Your Credit Score

When you use secured or unsecured credit cards, the creditor reports your financial information to the credit bureaus. There are three credit bureaus that collect your financial information in the US: Equifax, Experian, and TransUnion.

Positive information, such as on-time payments, will help you build credit over time and look financially stable to future lenders. The higher your credit score is, the more financial opportunities will be rewarded to you. You will be entrusted to use credit responsibly, and you could get access to better reward-based credit cards. Having higher credit scores can make taking out a loan a good idea

When you have bad credit, your financial options are limited. Bad credit loans, such as payday loans, are an option for financial emergencies. Still, the high rates can quickly leave you stuck in a debt spiral. 

A credit score is determined through the calculation of five categories:

  • Payment History (35%)
  • Total Debt (30%)
  • Length of Credit History (15%)
  • New Credit Inquiries (10%)
  • Credit Mix (10%)

Your credit score can improve when you improve your payment history on a credit report! The second best thing you can do for your credit score is to keep your debt to credit ratio low. By minimizing the use of your credit line, you can prove to creditors that you are financially responsible. 

Although you may have to deal with the burden of a security deposit to qualify for a secured credit card, the benefits far outweigh the cons!

Alternative Credit Building Tools

There is more than one way to build good credit. While a secured card is convenient, you should also consider the following credit building tools before making a final decision: 

Credit Building ToolFeaturesProsConsBest For
Credit-Builder LoansA loan where the borrowed amount is held in a bank account until fully paid.Helps build credit without upfront cash. Interest paid is often returned at the end of the term.May have fees or interest. Access to funds only after full payment.Individuals with no credit history.
Student Credit CardsCredit cards specifically for students with low or no income.Often have lower interest rates and no annual fee. Rewards and incentives.Low credit limits. Requires proof of student status.Students who are starting to build credit.
Co-Signed Credit CardsCredit card application co-signed by someone with established credit.Higher approval chances. Potentially better terms due to co-signer’s credit.Co-signer is liable for any debt. Can strain personal relationships.Those with poor or no credit history.
Secured Personal LoansLoans secured by a deposit or collateral.Access to larger amounts than secured credit cards. Can be used for various purposes.Requires collateral. Interest and fees.Individuals needing a loan for specific uses.
Authorized User StatusBeing added to someone else’s credit card account as an authorized user.Builds credit based on the primary account holder’s credit activity. No liability for payments.Dependent on the primary holder’s credit habits. Limited control over the account.Young adults or those rebuilding credit.
Store Credit CardsCredit cards issued by retail stores.Easier approval. Discounts and rewards at specific stores.High interest rates. Limited use (store-specific).Frequent shoppers at specific retailers.
Rent Reporting ServicesServices that report your rent payments to credit bureaus.Builds credit by paying rent on time. No additional debt incurred.Often requires a fee. Not all bureaus accept rent payments.Renters with steady rental payment history.

Frequently Asked Questions About Secured Credit Cards

What are the main differences between a secured credit card and an unsecured card?

Just so you know, the key difference is that a secured credit card requires a security deposit which often sets your credit limit. In contrast, an unsecured card doesn’t need a deposit and the credit limit is based on your credit history and income.

How does a secured credit card impact my credit report?

A secured credit card can positively impact your credit report. When you make on-time payments, it reflects well on your credit history, showing future lenders that you’re a responsible borrower.

Can I increase my credit limit on a secured credit card?

Absolutely! Many card issuers allow you to increase your credit limit on a secured card. Usually, this involves adding to your security deposit. It’s a smart way to boost your credit limit while maintaining secured credit.

Is it easier to get approved for a secured credit card than an unsecured card?

Yes, it typically is. Since secured cards are backed by a security deposit, card issuers are more willing to approve applicants, even those with limited or damaged credit history.

What happens to my security deposit if I miss a payment on my secured credit card account?

Good to know: Missing a payment might incur fees and interest, but your security deposit will usually remain intact. However, consistent late payments can lead to the card issuer using the deposit to cover the debts.

Can a secured credit card be converted into an unsecured card?

Yes! Many card issuers review your account after a period of on-time payments and responsible use. If you qualify, they might offer to upgrade your secured card to an unsecured card and return your deposit.

What should I consider when choosing a secured credit card?

When picking a secured card, consider the annual fee, interest rates, and whether the card issuer reports to all three major credit bureaus. It’s important to choose a card that aligns with your financial goals.

How long should I keep a secured credit card before applying for an unsecured card?

There’s no one-size-fits-all answer, but generally, using a secured card responsibly for about 12-18 months can significantly improve your credit history, making you a good candidate for an unsecured card.

A Final Summary From CreditNinja on Secured Credit Cards

Secured credit cards are a viable option for individuals that lack good credit. However, secured credit cards do not provide emergency funding. If you need a 300 loan, or more, and want to develop a good credit history, apply for a personal loan! At CreditNinja, we offer flexible credit score requirements and competitive rates. Apply online today to see if you qualify!   


  1. More Americans are relying on credit cards │ CNN
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