What is a Secured Card?

November 17, 2020

A secured credit card is like a mix between a debit and a credit card. Essentially, the cardholder deposits money into their account before using the card. Then, the cardholder gets a credit limit equal to the amount they deposited. The card functions like a normal credit card thereafter (you'll get a monthly bill, etc). If the cardholder don't pay their bill, the card company will keep their initial deposit. If the cardholder does pay their bill, they can get their deposit back at any time

So what are the advantages of a secured credit card? First, anyone can build their credit. Since secured cards are less risky for the card company, people with bad or little credit history have a higher chance of getting one. Like any other credit card, when you pay your bill on time you increase your credit score.

There are also some disadvantages. The main one being you need to deposit money before you can use the card. Unfortunately this is a reality that can't be changed. Additionally, secured credit cards tend to have lower (or no) rewards, they can be expensive (annual fees), and tend to look less prestigious than credit cards.

However, some of those problems can be fixed! At Lucky Card, we're building a secured credit card that has really good rewards. The card looks cool, and the best part is that it's free! We've also changed up some of the mechanics to encourage better financial habits. The process of using our card goes like this:

  1. Deposit money into your account
  2. Use your card. Money is subtracted from your balance (like a debit card)
  3. Instantly win $0 - $1,000 right after your transaction
  4. Deposit money again!

This approach is better in a few ways. First, you don't have to worry about paying your bill - you're never in debt. Other secured cards will charge you interest on your "late payments," even though you've already made your initial deposit! By treating the card similar to debit our cardholders also gain another advantage: their credit score can only go up. On the backend, we're making a "loan" to you and then immediately paying ourselves back from your balance. That's how your credit score increases without any debt.