Semi-Secured Credit Card

What Is a Semi-Secured Credit Card?

A semi-secured, or partially secured, credit card requires the account holder to first back the card with a deposit before the bank issues credit. But in contrast to a secured credit card, the credit limit granted may exceed the required deposit. So the deposit helps to limit the card issuer's risk but doesn't eliminate it altogether.

This type of card sometimes helps individuals with higher credit risk, or people trying to rebuild their credit history.

How a Semi-Secured Credit Card Works

Banks won’t offer credit cards to people who, for various reasons, have very poor credit scores (below 500): those just starting out or from another country with little or no credit history; those who have defaulted on loans; those who have gone through bankruptcy. A secured card functions like a regular credit card except that the credit line is limited to the amount of the cardholder’s cash deposit. The deposit serves as collateral should the cardholder default on payments. A secured credit card can be a first step for individuals who cannot access any credit at all, or who have a low credit score.

The semi-secured card is one step up. While it still demands a deposit, it typically extends a small amount of credit above the amount of the deposit you put up. So the credit limit on the card is higher — about double the deposit. For instance, for a deposit of $200, you may receive a credit line as high as $500. The typical cardholder is someone whose credit is too good for a standard secured card, but whose score is not high enough for a conventional card.

If holders of semi-secured cards regularly pay the account minimums on time, it may help them get a regular (non-secured) credit card in the future.

Banks tend to charge higher interest rates on secured and semi-secured cards, to compensate for the default risk they take on. The annual percentage rates (APR) on secured cards are often north of 20%, vs. a nationwide credit card average closer to 15%, as of February 2021. Also, some semi-secured cards have strict requirements, such as an annual fee in addition to the deposit.

Finding a Semi-Secured Credit Card

Usually, a semi-secured card is a transition stage from a secured card: After several months to a year, the secured cardholder graduates to semi-secured status, as a reward for good financial behavior. Nothing changes, except that the credit limit rises, without the request for additional collateral.

Occasionally a card will be offered as partially secured right from the start. The cardholder would probably have to have a credit score in at least the fair range (600-660), along with a documented ability to make payments. Semi-secured cards aren't advertised very heavily; often, it's a question of picking out a secured card and negotiating semi-secured status with the card issuer. The BankAmericard Secured Credit Card and Capital One Secured MasterCard are two that reportedly will give you a higher credit limit than your deposit balance upon request, either right away or after a few months of ownership.

The usual minimum number of months before a semi-secured credit cardholder can request an upgrade to an unsecured card.

Example of a Semi-Secured Credit Card

Say someone who used to own their own business had to shutter it, and now works a retail job. After a rocky period, this person is back to paying bills on time and applies for a secured card, seeing it as a bridge to getting a regular credit card over time, and an easier way to pay for expenses while traveling to visit family or buy household items online. This person saves up $300 and uses that for the required deposit. The bank extends $300 of credit on this card, with an interest rate of 22%.

Over time, the bank tracks the individual’s credit report and account history. After about six months of the cardholder paying the outstanding balance on time, the bank raises the credit limit to $700, without requiring any additional deposit. Eventually, the bank may decide to offer the account holder a regular credit card with a fairly small limit, and with a lower interest rate. At that point, it will refund the initial deposit.