Someone using their secured credit card with a low deposit

5 Benefits Of A Low Deposit Secured Credit Card

Secured cards are credit cards that require the consumer to make a deposit when opening the card. The amount of the deposit generally dictates the card's credit limit. You may think that most people utilizing secured credit cards would make as large of a deposit as possible to get a high credit limit, but this isn't always the best option. Learn why some consumers are better off with a low-deposit secured credit card. 

  1. Building Credit
    This is the day and age of credit cards. Even consumers who dead set against using them secretly have at least one for the rare occasion when they may need it for a purchase. For consumers with a bad credit score or little credit history, a secured credit card is the go-to option for building or rebuilding your credit. 

    To do this, you do not need a large deposit. All you need is enough of a deposit to have the card approved. You can make one purchase a month, make payments on time, and still see improvement in your credit score. 
  2. Access to Money
    With economy as tough as it’s been in recent years, many consumers just can’t afford to have their money sitting there and not have access to it in case of an emergency. By using a small deposit in the account, you have less money tied up in the credit card. The larger your deposit, the more money you’re going to have that’s sitting in an account and inaccessible to you. 
  3. Avoiding Temptation
    Many consumers find themselves in credit card debt because they have a difficult time avoiding the temptation of using credit cards for unnecessary spending. After waiting so long to get a credit card, you may inadvertently find yourself doing the same thing.

    By keeping a low deposit in your account, you’ll have a low credit limit so you’ll only be able to use the credit card so much until you’ve reached the limit. This can be a real benefit to people who do have trouble not using their credit cards because it'll help you learn restraint.
  4. Keeping Spending Down
    Regardless of how conservative and thrifty you may intend to be, you may still find yourself spending more than you’d like once you have your new credit card. The higher your credit limit, the more you may be inclined to spend. Having a low credit limit can prevent you from making unnecessary purchases and keep your spending down. Your budget will thank you!
  5. Save in Interest Costs
    Even though the money you’re “borrowing” from your credit card is secured by your deposit, you’re still paying interest on the money. Credit card users don’t often pay as much attention to the interest they’re paying as they should. By having a low deposit, you’ll be charging fewer things and, therefore, will pay less in interest charges. 

Although you may be initially be disappointed with a low-limit credit card, you may find this to be a great benefit in the long run. You’ll be able to build up your credit without going too much in debt. 

Last Updated: February 05, 2016