7 Very Wrong Ways to Utilize Secured Credit Cards and Create Bigger Credit Problems

Updated: Jul 4, 2024

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Ah, secured credit cards… To a lot of people, they are a taboo subject as they really don’t know much about them. Sadly, most people today think that credit cards are designed to hurt the holder. That’s true in some cases, but the issue lies on both sides, and consumers need to learn more about credit cards and how to use them. For this reason, we’ve decided to share this post with you and help you use your secured card the right way. No credit card is foolproof, so you need to be responsible when using it. Here are some of the biggest mistakes you can make when using a secured credit card.

1. Choosing The Wrong Secured Credit Card

We can’t stress enough just how important it is to find a good credit card for yourself. Not all credit cards are made equal, and they come in many different forms. Apart from that, every individual has different spending habits. Simply put, a card might work great for one person but be completely wrong for someone else. A secured card is supposed to be a short-term commitment. It’s often used for improving scores to switch to some better option. With this in mind, you need to find the right card for you. Some of the essentials you need to consider when getting one include:

  • Potential for an upgrade. In the best possible scenarios, your credit card provider will allow you to upgrade to a good unsecured credit card in the future. It ensures you won’t have a ding on your credit score due to the card shutting down. At the same time, you won’t have to go through another application, along with a potential credit check.
  • Affordable fees. Secured cards often come with fees, allowing you to boost your score but at a price. You need to calculate your budget and take into account the fees along with the deposit. Some cards have high annual fees going over $150 along with maintenance costs. Pass on these cards and look for something that you can afford. These costs might seem small, but they can quickly pile up.  Not paying your fees means that your card will generate negative activity and downgrade your credit score.
  • Affordable deposit. Apart from fees, secured cards require deposits so that they can be. In fact, they often have a minimum amount you need to make. The minimum can go from $200 up to $500. Make sure to analyze your finances and see what you can afford. If not, you won’t be able to use the card properly and quickly improve your credit score.
  • Reports to the credit bureaus. Your credit card vendor needs to guarantee reports to all of the major credit bureaus, including TransUnion, Experian, and Equifax. If not, then there is no point in using their secured credit card. Let’s face it – secured cards aren’t the best ones out there. Their primary purpose is to help you quickly boost your credit score to get a better one. It’s impossible to do this with ongoing credit reports. (See: Credit Reporting Cards)

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Surge Secured Applied SecuredSable ONEMerrick SecuredFirst Progress Elite
Annual fee$69$48$0$36$29
Regular APR19.99%9.99%Prime + 6.99%18.20%19.99%
APR TypeVariableFixedVariableVariableVariable
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Credit Line$300$200 – $5,000$10 – $10,000$200 – $3,000$200 – $2,000
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2. Not Paying The Deposit

Believe it or not, many people fail to pay their deposit once they’ve applied for a secured card. People get approved, and instead of starting their road to improved credit score, they end up ruining it. Simply put, they don’t make the security deposit. Most credit card issuers won’t open up your account unless you’ve made the deposit. There is usually a limited time period during which you are expected to make the deposit. If the applicant doesn’t do so, this will leave a mark on their credit report, and they won’t be able to open their secured account. It’s extremely counterproductive as you are looking to build your credit, not deteriorate it even further.

Getting a secured card means obtaining a tool that can help you build credit. But if you don’t make the deposit, you will just ruin it further. Be responsible and apply for the card you are sure you need. In the end, remember to consult with the card issuer on how much time you have to make the deposit. You don’t want to be somewhere away when your card arrives and miss the deadline for the deposit.

3. Keeping Your Credit Utilization High

A credit score is a number that lenders look at to see how reliable you are for lending money, which opens up various opportunities for loans, mortgages, and financial services. Improving your credit score means proving that you can handle the money you’ve borrowed in a responsible way over time. When it comes to credit cards, this means using the card regularly and paying off your balance on time.

When you use the card every month, you will demonstrate regular activity. However, you shouldn’t max out the card. Instead, this card should be used for simple purchases that won’t come near your card’s limit. It’s referred to as “credit utilization.” Credit utilization is the amount of credit on your card that you are using. In an ideal situation, you should keep your balance lower than 10% to get the best reports possible each month. $500 $150 $50 30% 10%

Credit Limit  BalanceCredit Utilization

However, keeping credit utilization under 30% is still good and more realistic. Since secured credit cards don’t have high limits, you won’t be able to make larger purchases and keep credit utilization low.

4. Extending Your Credit Limit

As we mentioned earlier, secured cards should be used as a tool for building credit. They aren’t the flagship credit cards you can use constantly for any purchase to reap major benefits. In fact, they are costly and expensive when compared to some of the best credit cards out there. But the reason why people don’t feel these adverse effects so much is that these cards are meant for low balances or budgets. Many people make the mistake of extending the credit limit on secure cards. What does this mean? It means that they will be able to spend more on the card each month.

While that might seem like a good thing at first, it’s actually a money pit. When you spend more, you will lose more money. On top of that, when you have a limit of up to $800, you will find it difficult to keep your credit utilization low. The more you spend, the more you will have to pay off. You might be able to do it for the first few months, but it can quickly get out of hand.

5. Not Paying off Your Balance

Let’s face it – if you have a bad credit score, chances are you haven’t made good financial decisions in the past. At the same time, you probably don’t have a lot of money at your disposal. But you don’t need a lot of money to improve your score with a secure card. The only thing you need is discipline and responsibility. Like all other credit cards, secured options also include interest when you carry a balance.

Ideally, you should look to pay it off completely each month. That’s how you will reduce your costs and leave a better mark on your credit report. Consider making recurring payments that are a priority each month. The sweet spot is to spend 30% of your limit and pay it off completely. However, there aren’t any exact rules. Just organize your finances in a way so that you can clear your balance and demonstrate responsibility.

RELATED: Secured Credit Cards Explained

6. Getting Into the Interest Zone

Secure cards are offered to people with a low credit score. However, lenders need to protect themselves and force cardholders to use their cards responsibly, so these cards have higher interest rates. There is a bigger risk of default and lenders see this as the reason to increase the interest rates. It all depends on one card to another, but in general, the higher the balance, the higher your interest will be.

In some cases, you will have fixed interest, but this is still something you should avoid. The goal is to pay off your balance completely without wasting additional money that you need so much to get out of the slump. Additionally, interest can have a snowball effect. When you miss one payment, you will have more to pay the next time, and so on, and so on. A lot of people end up in this vicious cycle where they are unable to afford the interest.

7. Sticking to Your Secured Cards for too Long

We said it twice, and we’ll say it again. Secured accounts aren’t meant to be held forever! In fact, you should look to get rid of one as soon as you have the option to get something better. Yes, they are great tools for improving your credit score, but this doesn’t mean that they are the right choice for you. There are many other cards out there that offer better perks while still helping you improve your credit.

As soon as you can get a better card, you should do it. See what your credit card issuer has to offer and look to upgrade to something else. If not, look for a card elsewhere. Make sure to check your credit score regularly and track its performance. When you notice that you are eligible for some good card, make the switch.

Secured Cards Available for Application


Secured accounts are great for improving your credit. They are your second chance in terms of fixing your credit score. If you avoid all of these mistakes above, you’ll be able to get your security deposit back and use that money to apply for some other card. Establish good habits and be disciplined. With this approach, you will fix your credit score in no time.

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