Building Credit with Secured Credit Cards: How They Work and Who Should Use Them?

Why is it important to develop credit, and how many secured credit cards help? In India, establishing a strong credit history is critical for financial stability and long-term financial success. Secured credit cards are a useful tool for anyone trying to develop or repair their credit. Unlike ordinary credit cards, secured cards require a cash deposit that serves as collateral and usually determines the credit limit.

How do secured credit cards work?

Secured credit cards operate on a simple principle: you deposit with the issuing bank, and this deposit becomes your credit limit. For example, if you deposit Rs 10,000, you can charge up to Rs 10,000. While American Express Platinum Reserve and the American Express Smart Earn Credit Card are examples of unsecured credit cards, secured credit cards are offered by Axis Bank, State Bank of India, HDFC Bank and others. Usage of secured cards report your payment history to credit bureaus, aiding in building your credit score as you use the card responsibly and pay balances on time.

Who should consider using secured credit cards?

Secured credit cards are good for people with no credit history or people who want to improve their credit scores. These can be young adults who are beginning with their financial life or individuals who have encountered financial mishaps and have a poor credit record. To utilise a secured credit card correctly, you need to ensure that you maintain a low credit utilisation balance, make timely payments and keep your card active for at least one to three years to develop a considerable credit history.

Top benefits of secured credit cards

Credit building

Secured credit cards are indispensable in the process of credit building or credit repair as they are reported to the major credit bureaus. The use of a secured card and a timely payment show that the users are creditworthy. Each time they pay on time, their credit history is improved, which is essential for further financial transactions such as the application for loans or unsecured credit cards. Such systemic reporting builds a sequence of reliability and financial responsibility.

Controlled spending

The amount you put as collateral on a secured credit card provides the credit limit which prevents you from overspending. This limit, in turn, assists users in governing their finances because it curbs the urge to overspend and incur debts that are hard to pay off. Controlling unnecessary spending is the most appropriate strategy for those new to credit or for those who are trying to recover from previous financial mistakes by encouraging a lifestyle of not exceeding one’s means.

Low entry requirements

Secured credit cards are easier to get approved than unsecured ones and typically require perfect credit and a good credit history. The availability of such cards makes them a good choice for those with no or poor credit history.  A secured credit card can be obtained by anyone who can afford the cash deposit, making it a first step in the direction of financial inclusion.

Security deposit interest

Not all but some of the banks give interest on the deposit made for a security credit card. This function serves as a savings account, the longer you leave your deposit, the more interest it earns, although at a lower rate than traditional banks. This can act as an additional incentive for cardholders as it helps to cover some of the expenses associated with the card while their money grows on the side.

Upgrade opportunities

A secure credit card that is used regularly and responsibly might lead to an upgrade to another type of card, probably an unsecured card, for example, the American Express Smart Earn Credit Card. This transition is usually the result of a history of punctual payments and good account management. Unsecured cards have higher credit limits, fewer restrictions, and better reward programs, which are beneficial for regular customers and also for the ones who want to use credit for bigger purchases.

Also Check: American Express Platinum Reserve Credit Card

Rewards and incentives

Lots of secured cards provide rewards programs that are similar to those of unsecured cards. These can be in the form of cashback for purchases, points that can be redeemed for goods and services, or discounts with partner merchants. Thus, it makes secured cards more attractive and can increase the potential impact of everyday transactions, especially in the case of necessary purchases (e.g., groceries or fuel).

Global acceptance

These internationally accepted secured credit cards, such as the American Express Platinum Reserve, can be used the same way as regular credit cards at any retailer in the world. This feature is also very useful for travellers who want to have a secure payment method outside the country. This guarantees that travellers have a safe and recognised payment method available for use once they leave their home country’s borders.

Credit limit enhancements

Cardholders who demonstrate a habit of responsible card usage and financial stability may frequently negotiate increased credit limits on their secured cards without having to increase their deposits. This increase in credit limit can assist improve credit scores by lowering the credit utilisation ratio, as long as the cardholder does not raise their expenditure accordingly.

Financial discipline

Using a secured credit card forces consumers to maintain their expenditures under the deposit amount, which promotes disciplined planning and spending. This financial restriction is critical for long-term financial health as it educates cardholders to carefully consider their spending decisions and prioritise necessary over frivolous purchases.

Emergency readiness

A secured credit card guarantees that you have a readily available line of credit for unexpected needs, such as medical crises or necessary repairs. This safety net is especially crucial for people who do not have enough resources to meet unexpected expenses, as it provides peace of mind and financial security when it is most needed.


Secured credit cards are a useful financial instrument for individuals in India who want to improve their credit history and score. With the ability to convert to products such as the American Express Smart Earn Credit Card, these tools not only help people establish credit but also teach financial awareness and responsibility. Whether you are starting over or improving your financial situation, a secured credit card provides a systematic road to financial health, making it an essential element of your financial toolset.

Read must Stay Connected with Your Finances: AU Net Banking and Credit Card Application Status Updates

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