What we verified in “Secured credit cards: how they work and fees to watch”

Statements and where we checked them

The statements with rules, figures or dates, with the exact place in the source and the date we checked them.

1. According to the CFPB, if you do not qualify for a regular credit card you can try a secured card; many banks and credit unions offer them; with most, your credit line starts out small; you put an amount equal to your credit limit in an account as a deposit; as you show you can pay on time, your limit may be raised and your deposit may be refunded; and fees and interest rates can be high for secured cards, but using one can help you establish a credit record.

   Sources 1 · How to rebuild your credit, step 4: 'If you do not qualify for a regular credit card, try a secured card'; 'Many banks and credit unions offer secured credit cards'; 'your credit line starts out small'; 'You put an amount equal to your credit limit in an account as a deposit'; 'your credit limit may be raised and you may have your deposit refunded'; 'Fees and interest rates can be high for secured cards, but using one can help you to establish a credit record' · Checked October 17, 2026

2. According to the CFPB, 'on time' means the payment reaches the company by the due date; paying the full balance each month avoids finance charges and can build better credit than carrying a balance, because it keeps you away from your limit; some experts advise using no more than 30 percent of your total limit; using a prepaid card does not help rebuild your credit; and recent negative information generally affects your score more than older information.

   Sources 1 · How to rebuild your credit: 'means the payment gets to the company by the day the bill is due'; 'Pay off your balances in full each month to avoid paying finance charges'; 'Paying off your balance each month can also build better credit than carrying a balance'; 'Some experts advise using no more than 30 percent of your total credit limit'; 'Using a prepaid card'; 'recent negative information has more of an effect on your credit score than older information' · Checked October 17, 2026

3. The CFPB suggests asking your bank, credit union or a local nonprofit credit counseling agency about cards and loans that help build credit; payments are reported to the three nationwide credit reporting companies, which create a report for you, and paying on time, every time, helps build a strong history; with a secured card you put in an amount of cash, for example $500, and can spend up to that amount, and paying the bill restores your spending amount; a prepaid card, by contrast, only lets you spend money you loaded beforehand and does not build history, and with debit or cash you are not borrowing money you must repay later.

   Sources 2 · What are some ways to start or rebuild a good credit history? (page last modified Sept. 13, 2024): 'Ask your bank, credit union, or local nonprofit credit counseling agency'; 'The payments you make are reported to the three nationwide credit reporting companies, and they create a credit report for you'; 'Paying on time, every time, can help you build a strong credit history'; 'You put in an amount of cash, for example $500'; 'you restore your spending amount back to the amount you put in'; 'Unlike a secured credit card, when you use a prepaid card, you can spend only the money you deposited beforehand'; 'prepaid cards do not help you establish your credit history'; 'you are not borrowing money that you need to repay later' · Checked October 17, 2026

4. The CFPB sheet 'Building credit from scratch' explains that you apply for a secured card as you would a traditional card; once approved you deposit money into a separate account and the bank extends a credit line matching the deposit; that you can generally build credit with it, but you should ask the issuer about reporting to the credit reporting companies; and that many of these cards include a 'graduation' component to move to a traditional card after a pattern of consistent payments.

   Sources 3 · Building credit from scratch (CFPB, February 2017), 'Secured credit cards': 'Apply for this card as you would a traditional credit'; 'and extends a credit line matching the deposit'; 'Generally, you can build credit with a'; 'secured card, but be sure to ask your card issuer'; 'about reporting to the credit reporting companies'; 'component, so you are able to move from a'; 'after establishing a pattern of consistent payments' · Checked October 17, 2026

5. In its supervisory exams, the CFPB found card issuers that misled or were likely to mislead consumers by saying orally that secured accounts would automatically graduate to unsecured accounts on a set timeframe, such as six or twelve months after opening; in fact they did not upgrade on any preset timeframe and graduation depended on other factors; and other issuers advertised periodic reviews for graduation but did not review those accounts for a year or more.

   Sources 4 · Supervisory Highlights, Issue 19 (September 2019), 2.2.4 'Deceptive marketing regarding secured credit card accounts', pp. 5-6: 'misled or were likely to mislead consumers by orally representing that secured credit card'; 'specific timeframe, such as six or twelve months after origination'; 'In fact, the issuers did not upgrade secured card'; 'accounts on any preset timeframe, and upgrade or graduation was conditioned on additional'; 'In fact, the issuers did not review such accounts for a year or more' · Checked October 17, 2026

6. Under Regulation Z, the total fees you are required to pay on a credit card account during the first year after opening cannot exceed 25 percent of the credit limit in effect when the account was opened; the cap does not include late payment, over-the-limit or returned-payment fees, or fees you are not required to pay.

   Sources 5 · 12 CFR §1026.52(a)(1): 'the total amount of fees a consumer is required to pay with respect to a credit card account under an open-end (not home-secured) consumer credit plan during the first year after account opening must not exceed 25 percent of the credit limit in effect when the account is opened'; (a)(2): 'Late payment fees, over-the-limit fees, and returned-payment fees'; 'Fees that the consumer is not required to pay with respect to the account' · Checked October 17, 2026

7. According to the official interpretation of Regulation Z, a security deposit charged to the credit card account counts as a fee for the first-year cap, but a deposit that is not charged to the account is not subject to that 25 percent limit; and the commentary itself gives the example of an account with a $500 limit at opening, on which the issuer may charge $125 in fees.

   Sources 6 · Official Interpretation, Supplement I to Part 1026, comment 52(a)(2)-5 'Security deposits': 'A security deposit that is charged to a credit card account is a fee for purposes of'; 'a security deposit is not subject to the 25 percent limit'; 'if it is not charged to the account'; comment 52(a)(1)-1.ii: 'the credit limit for the account is $500. Section 1026.52(a)(1) permits the card issuer to charge the $125 in fees to the account' · Checked October 17, 2026

8. Under Regulation Z, the issuer may not charge a fee for violating the card's terms that exceeds the dollar amount associated with the violation; there is no dollar amount associated (so no such fee) for a transaction the issuer declined to authorize; and it may not charge more than one penalty fee for a single event or transaction.

   Sources 5 · 12 CFR §1026.52(b)(2)(i)(A): 'that exceeds the dollar amount associated with the violation'; (b)(2)(i)(B): 'Transactions that the card issuer declines to authorize'; (b)(2)(ii): 'must not impose more than one fee for violating the terms or other requirements' · Checked October 17, 2026

9. Under Regulation Z, with a credit card application or solicitation the issuer must give you, generally in the form of a table, the annual percentage rate (APR), any annual or other periodic fee for having the card, any one-time account opening fee, the grace period and the cash advance, late payment, over-the-limit, balance transfer and returned-payment fees; and if required fees or a security deposit charged to the account at opening add up to 15 percent or more of the minimum credit limit, it must tell you how much available credit remains after they are charged.

   Sources 7 · 12 CFR §1026.60(a)(2)(i): 'generally shall be in the form of a table'; (b)(1): 'Annual percentage rate'; (b)(2)(i): 'Any annual or other periodic fee that may be imposed for the issuance or availability of a credit or charge card'; (b)(2)(ii): 'Any non-periodic fee that relates to opening an account'; (b)(5) 'Grace period'; (b)(8) 'Cash advance fee'; (b)(9) 'Late payment fee'; (b)(10) 'Over-the-limit fee'; (b)(11) 'Balance transfer fee'; (b)(12) 'Returned-payment fee'; (b)(14): 'or requires a security deposit for such credit, and the total amount of those required fees and/or security deposit that will be imposed and charged to the account when the account is opened is 15 percent or more of the minimum credit limit for the card, a card issuer must disclose the available credit remaining after these fees or security deposit are debited to the account' · Checked October 17, 2026

10. According to the CFPB, card issuers are generally required to post on their websites the card agreements they offer to the public; the CFPB database holds those agreements, with general terms and conditions, pricing and fee information; and by law the issuer must make your agreement available to you on request.

    Sources 8 · Credit card agreement database: 'Credit card issuers are generally required to post the credit card agreements that they offer to the public on their websites'; 'The agreements in this database have general terms and conditions, pricing, and fee information'; 'By law, the issuer must make your agreement available to you upon request' · Checked October 17, 2026

11. According to the CFPB, a credit card's interest rate is the price you pay for borrowing money, usually stated as a yearly rate (APR); and on most cards you can avoid paying interest on purchases if you pay your balance in full each month by the due date.

    Sources 9 · What is a credit card interest rate? What does APR mean? (page last modified Aug. 30, 2023): 'A credit card's interest rate is the price you pay for borrowing money'; 'This is called the annual percentage rate (APR)'; 'On most cards, you can avoid paying interest on purchases if you pay your balance in full each month by the due date' · Checked October 17, 2026

12. According to the CFPB, card companies are not required to give a grace period, although most cards provide one on purchases; they must mail or deliver your bill at least 21 days before the payment is due; if you take a cash advance, you generally pay interest from the date of the transaction; and if you pay in full some months and not others, you may lose your grace period.

    Sources 10 · What is a grace period for a credit card? (page last modified Sept. 25, 2024): 'Credit card companies are not required to give a grace period'; 'most credit cards provide a grace period on purchases'; 'at least 21 days before the payment is due'; 'If you use your card to get a cash advance'; 'generally you must start paying interest as of the date of the transaction'; 'If you pay in full some months, and not in other months, you may lose your grace period' · Checked October 17, 2026

13. According to the CFPB, before granting credit the card issuer may ask about your income, to know whether you can make the minimum payment, and for your Social Security number, to get your credit report.

    Sources 11 · Can the card issuer request information about my income, my age, and my Social Security Number when I apply for a credit card? (page last modified Sept. 6, 2024): 'the card issuer may ask about your income so they know whether you can pay the required minimum periodic payment'; 'the card issuer may ask for your social security number to get your credit report' · Checked October 17, 2026

14. According to the CFPB, card companies usually set your limit after you apply, reviewing your credit report and the income you gave; and if the issuer lowers the limit on a card you already have, it generally must give you an adverse action notice with the specific reasons or the option to request them.

    Sources 12 · Why did I get a low credit limit on a credit card? (page last modified Sept. 10, 2024): 'Credit card companies usually determine your credit limit only after you've applied for a credit card'; 'they generally review your credit report and history as well as the income information you provided on your application'; 'If a card issuer decreases your credit limit on an existing card'; 'this adverse action notice must provide specific reasons for the action taken or allow you to request a statement of specific reasons' · Checked October 17, 2026

15. The CFPB says most credit scores consider repayment history the number one factor; it suggests automatic payments or electronic reminders; says experts advise using no more than 30 percent of your total limit and that paying the full balance each month helps you get the best scores; that applying for a lot of credit in a short time may make lenders think you have financial setbacks; and that if you are new to credit you can consider products such as secured credit cards and credit builder loans.

    Sources 13 · How do I get and keep a good credit score? (page last modified Dec. 18, 2024): 'Most credit scores consider repayment history as the number one factor'; 'set up automatic payments or electronic reminders'; 'Experts advise keeping your use of credit at no more than 30 percent of your total credit limit'; 'Paying off the balance in full each month helps get you the best scores'; 'it may appear to lenders that you are dealing with financial setbacks'; 'such as secured credit cards and credit builder loans' · Checked October 17, 2026

16. According to the CFPB, closing a card can raise your utilization ratio and lower your score; some people keep an old account with a positive history open because it may help maintain a higher score; and closing it may make sense if the card has annual fees or poor terms that outweigh the benefits.

    Sources 14 · Does it hurt my credit to close a credit card? (page last modified Jan. 14, 2025): 'Closing an existing card can increase your credit utilization ratio and lower your score'; 'especially if it's an old account and they have a positive payment history because this may help maintain a higher credit score'; 'The card has annual fees or poor terms that outweigh the benefits' · Checked October 17, 2026

17. Under Regulation Z, the issuer may not, before or after terminating the card, take your funds on deposit with it to offset your card debt; but that rule does not affect its right to obtain or enforce a security interest in those funds that you agreed to.

    Sources 15 · 12 CFR §1026.12(d)(1): 'A card issuer may not take any action, either before or after termination of credit card privileges, to offset a cardholder's indebtedness'; (d)(2): 'Obtain or enforce a consensual security interest in the funds' · Checked October 17, 2026

18. According to the CFPB, credit reporting companies can generally report negative payment history information for up to seven years, and positive information for longer.

    Sources 16 · How long does information stay on my credit report? (page last modified Sept. 2, 2026): 'can generally report negative information about your credit account payment history for up to seven years, and may report positive information for longer' · Checked October 17, 2026

19. HUD-approved housing counselors give independent advice on buying a home, renting, defaults and credit issues, often at little or no cost.

    Sources 17 · Find a Housing Counselor: 'Housing counselors throughout the country can provide advice on buying a home, renting, defaults, forbearances, foreclosures, and credit issues'; 'they can offer independent advice, often at little or no cost to you' · Checked October 17, 2026