Everything you need to know about getting a secured credit card

If you're looking to build or rebuild credit, secured credit cards are one of the best options available.

You can use a secured card to make purchases just with like a traditional (i..e, unsecured) card, though they typically require a cash deposit and have a low credit limit. But, using a secured card responsibly can help establish good credit and make more lines of credit available to you in the future.

Below, CNBC Select outlines how secured credit cards work, the credit requirements to get one and how to transition to an unsecured card.

A secured credit card is a gateway for borrowers with low credit. Like an unsecured card, you receive a credit limit and may even earn rewards.

The main difference is that a secured credit card requires a security deposit that acts as collateral and typically determines your credit limit. If you make a $200 security deposit, you'll receive a $200 credit limit, for example. Most

You can get your deposit refunded by successfully upgrading to an unsecured card or by paying off your balance and closing your account.

A secured card operates much like a regular card, though they are typically easier to qualify for.

Besides the requisite deposit, a secured card usually has one variable annual percentage rate, like 24.99%. Most unsecured cards have an APR that's a range — say, 13.99% to 24.99%.

Because the APR is usually higher on a secured card, it's especially important to pay your bill on time and in full to avoid fees.

Here are some key differences between secured credit cards and unsecured cards.

• Deposit requirement. A secured card requires a cash security deposit, while an unsecured credit card does not.
• Credit score requirement. Most unsecured credit cards require a good to excellent credit score, which can range between 670 to 850. However, secured credit cards offer more flexibility, making it possible to qualify even with poor credit.
• Average APR. APRs can look a little higher for secured credit cards, compared to unsecured credit cards.
• Credit limit. The credit limit on a secured card is linked to the size of the deposit, and usually starts at $200. Unsecured cards usually have a much higher credit limit
• Rewards. While some secured cards include rewards, traditional cards almost always earn better perks.

If you make payments on time and in full, that information is sent to the three main credit bureaus, Experian, Equifax and TransUnion, which which helps boost your credit score and puts you on the path to qualifying for an unsecured card.

Here are some ways you can build your credit with a secured credit card:

• Pay your bill on time. Payment history makes up 35% of your FICO credit score, making it the largest single component.
• Maintain a low credit card balance. Your credit utilization ratio is responsible for 30% of your FICO score. Paying off all or most of your balance can keep that ratio low.

There are several factors to consider when choosing a secured credit card, including how much the deposit is, how you can transition to an unsecured card and if you earn rewards.

The Discover it® Secured Credit Card requires a refundable security deposit of at least $200, but you can earn 2% cash back at gas stations and restaurants, up to $1,000 in combined purchases each quarter, and unlimited 1% cash back on all other purchases.

There is no annual fee and Discover will automatically review your account after seven months to see if you qualify to transition to an unsecured line of credit.

The Capital One Platinum Secured Credit Card doesn't have a reward program, you can put down a refundable security deposit starting at $49 to get a $200 initial credit line. (See rates and fees).

While a secured card is a great way to build credit, it's not an ideal long-term option since you have to deposit money to receive a credit limit.

The transition to an unsecured card varies by company. With the Discover it® Secured Credit Card, for example, your account is automatically reviewed after seven months.

If your issuer doesn't offer an automatic upgrade process, you can ask to be transitioned to an unsecured card. Be aware that a credit check may be performed.

Some card issuers may not offer a transition process, so you would have to close your secured card account and open a new card.

Before you close a secured card, make sure you apply for a new card and are approved. If you close your card before opening a new one, it may be more difficult to be approved.

Secured credit cards offer a path to building or repairing your credit. Though they come with a deposit requirement and a lower credit limit, that can protect you from doing more damage to your credit. Consistently making small purchases with a secured credit card can significantly contribute to your credit history and pave the way to an unsecured credit card.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of credit cards. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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For rates and fees of the Discover it® Secured Credit Card, click here.