How much should you spend on a secured credit card monthly?

What is a secured credit card?

A secured credit card is a type of credit card that requires a security deposit that acts as collateral. The deposit amount usually becomes the credit limit on the card. Secured cards are designed for people trying to establish or rebuild their credit. By making on-time payments, you can show credit bureaus that you can responsibly use credit, which may help improve your credit score over time.

How do secured credit cards work?

To get a secured card, you’ll first need to provide a deposit, usually a minimum of $200. The deposit acts as a form of collateral on the account. If you default on payments, the card issuer can use that money to cover any balances owed. The deposit amount determines your credit limit. For example, if your deposit is $500, your credit limit will also be $500.

You’ll use the secured card just like a regular credit card, charging purchases to it and paying the balance monthly. The card issuer will report your payment history to the major credit bureaus. If you consistently make your monthly payments on time, it shows you’re able to manage credit responsibly.

After establishing a positive payment history, usually after about 12 months, you may qualify to graduate to an unsecured card and have your deposit refunded.

Benefits of secured credit cards

Some key benefits of secured cards include:

  • Help build or rebuild credit – Making on-time payments shows credit bureaus you can handle credit responsibly.
  • Easier to qualify – Secured cards are designed for those with poor or no credit history.
  • Lower credit limits – Limits based on upfront deposit can help prevent overspending.
  • Graduate to unsecured card – After establishing good payment history, you may qualify for an unsecured card and get your deposit back.

How much should you spend each month?

When trying to build your credit with a secured card, experts generally recommend keeping your credit utilization ratio below 30%. Your credit utilization ratio is the amount you owe compared to your total credit limit.

For example, say your secured card has a $200 credit limit. To keep your utilization under 30%, you would not want your statement balance to exceed $60. This typically means limiting your monthly spending to no more than $60 on that card.

Here are some tips for staying under 30% utilization:

  • Only use the secured card for a small purchase each month, such as a recurring bill or expense you were already paying for with cash or debit. This can help ensure you don’t overspend.
  • Consider setting up autopay from your checking account to pay the monthly bill in full. This way you don’t risk missing payments and can keep utilization low.
  • Avoid running up large balances and only charge what you can afford to pay off. Carrying high balances can negatively impact your credit scores.

Factors that determine your credit limit

As mentioned earlier, the size of your security deposit typically determines your initial credit limit on a secured card. The minimum deposit is usually around $200, while some issuers allow deposits of $500 or more.

The larger your deposit, the higher your credit limit is likely to be. However, there’s no need to tie up funds in a huge deposit, especially when you’re just starting to use credit. Aim to make a deposit you’re comfortable with that will give you a manageable credit limit.

While your initial limit is based on your deposit, your limit can be increased over time. After several months of on-time payments, the card issuer may approve you for a higher limit without requiring an additional deposit. This is a sign your creditworthiness has improved.

Tips for determining your deposit amount

Here are some tips for choosing your security deposit amount:

  • Start small – Consider a deposit of $200 to $500 to open the account and establish a baseline of creditworthiness.
  • Think about your budget – Choose an amount you can afford to have tied up until you graduate to unsecured credit.
  • Consider your spending needs – If you plan to use the card regularly, make sure the deposit provides a high enough limit.
  • Increase later – After some on-time payments, you can request an increase and add to your deposit if needed.

Ultimately, put down a deposit you’re comfortable with so you can focus on using the card responsibly, not worrying about tying up a large sum.

How your credit limit impacts utilization

Your credit limit on a secured card directly affects your credit utilization if you’re carrying a balance. The lower your limit, the easier it is for your utilization to creep above 30% if your spending needs arise.

For example:

  • Credit limit of $200 – Owing just $61 would put your utilization over 30%
  • Credit limit of $500 – You could owe up to $150 before going over 30%
  • Credit limit of $1,000 – You could owe up to $300 and still be under 30%

That’s why it’s important not to charge more than you can pay off each month when you’re working to establish or rebuild credit. A low limit makes it harder to keep utilization low if you do carry a balance month-to-month.

Should you accept credit limit increases?

As you demonstrate responsible usage of your secured card, the issuer will likely offer periodic increases to your credit limit without requiring an additional deposit.

Accepting these offers can be beneficial once you’ve established a solid payment history, as it will allow you to utilize more credit without increasing your utilization percentage.

However, don’t take the bait and increase your spending just because you have a higher limit. Only accept increases you reasonably expect to need for planned expenses and larger purchases.

Declining the offers is also fine if you are comfortable with your current limit. Having too high a limit can lead some people to overspend. Do what makes the most sense for your budget and spending tendencies.

How long does it take to build credit with a secured card?

Improving your credit scores takes patience and consistency. Typically, you should start to see progress around the 6 to 12 month mark as long as you make all your payments on time.

Many secured card issuers will review your account after 12 months to determine if you can “graduate” to an unsecured card. At that point:

  • Payment history greater than 90 days becomes part of your credit reports
  • A year’s worth of on-time payments establishes positive credit
  • Your credit scores will begin to factor in your positive behavior

However, credit scoring models differ, so your improvement may be gradual. Expect building your credit with a secured card to take at least 12 months before you start seeing results.

Mistakes to avoid

To successfully build your credit with a secured card, be sure to avoid these common mistakes:

  • Making late payments – Set up autopay so you never miss a due date.
  • Maxing out your card – Keep utilization below 30% by only charging what you can pay off.
  • Applying for too many new accounts – Multiple new accounts can negatively impact scores.
  • Closing your account – Keeping accounts open with positive history builds credit.

By avoiding these errors and using your card properly, you can establish positive credit in about a year.

Sample spending plan

Here is an example spending plan for a secured card with a $200 credit limit aimed at keeping utilization under 30%:

Credit limit $200
Monthly phone bill $40
Monthly secured card payment to keep utilization under 30% $40
Remaining available credit $160

This user charges a recurring $40 phone bill to keep the account active. They pay that $40 each month to avoid interest. Their remaining $160 credit limit gives them room for additional spending as needed, while keeping their utilization under 30%.

The impact of paying in full each month

Ideally, you’ll want to pay your secured credit card balance in full each month to avoid interest charges. However, even if you can’t pay in full, paying at least the minimum on time is crucial.

Paying in full provides these benefits:

  • No interest fees – Avoid wasted money on interest charges.
  • Lower utilization – Your balance won’t build up, so utilization stays low.
  • Simpler payments – No need to worry about varying interest charges each month.

However, it’s more important to pay on time than in full when building credit. Even if you can’t pay off the balance completely, be sure to cover at least the minimum payment due before the monthly due date.

Tips for paying in full

Here are some tips to help you pay your balance in full each month:

  • Only charge what you can afford based on your budget
  • Pay down most of the balance mid-cycle before interest accrues
  • Set up autopay for the remaining balance by the due date
  • Review transactions regularly to avoid surprises on your bill
  • If you do carry a balance, pay as much as possible to lower utilization

The impact of only making minimum payments

If you consistently only pay the minimum due on your credit card statement, it will take longer to pay off the balance and cost you much more in interest fees over time.

Here are some downsides of only making minimum payments:

  • Interest charges accumulate – This increases your total balance over time.
  • More goes to interest than principal – Less of your payment applies to the initial charges.
  • Higher utilization – Your balance stays higher, resulting in higher utilization.
  • Longer payoff timeline – It can take years to pay off the balance.
  • Higher APRs – Issuers may increase your interest rate if they see you are relying on minimum payments.

If possible, always strive to pay more than just the minimum due to save on interest fees. However, paying the minimum on time is still better for your credit than missing payments or paying late.

Should you close a secured credit card?

It’s generally recommended to keep your secured card open even after you graduate to an unsecured card, rather than closing the account. Here are some reasons it can be beneficial to keep it open:

  • Maintains credit history – Keeping the original card open preserves that positive history.
  • Helps credit mix – Having both a secured and unsecured card demonstrates you can handle different types of credit.
  • Provides higher total limit – Having two cards increases your total available credit.
  • Keeps utilization lower – Spreading debt across two cards reduces your percentage of credit utilization.

Unless there is an annual fee you want to avoid, it usually makes sense to keep the secured card open after getting approved for unsecured credit. Keep in mind you can always request a credit limit decrease if the initial deposit amount ties up too much available credit.

Alternatives to closing the card

Rather than closing your secured credit card, consider these options:

  • Use it sparingly – Charge a small recurring monthly bill, like a streaming service, to keep it active.
  • Ask for lower limit – You can request to decrease your credit limit while keeping account open.
  • Convert to unsecured – Some issuers allow converting to a no-deposit unsecured card.
  • Downgrade options – You may be able to switch your account to a free, no-fee version.

By keeping the card open using one of the above methods, you can maintain your positive history and improve your credit mix.

Graduating to unsecured cards

After making consistent on-time payments on your secured card for about a year, the issuer will likely review your account and may approve you for an unsecured card. This is known as “graduating” from secured to unsecured credit.

Benefits of graduating to an unsecured card:

  • No deposit required – Free up your funds that were tied up as collateral.
  • Higher credit limits – Unsecured cards come with higher limits.
  • More rewards – Unsecured cards tend to have better rewards programs.
  • Added convenience – You won’t have to plan purchases around your deposit limit anymore.

Look for these signs that indicate you may be ready to apply for unsecured credit:

  • On-time payments for 12+ months
  • Credit scores in the high 600s
  • Low credit utilization (below 30%)
  • No new credit inquiries in past 6 months
  • Getting credit limit increase offers

How to request a product change

Many secured card issuers will automatically consider you for graduation to one of their unsecured cards after about 12 months of responsible use.

If that doesn’t happen, you can always contact customer service and request your account be changed to an unsecured credit card. Here are some tips for a product change request:

  • Ask about their policy – issuers typically review accounts at 12+ months.
  • Highlight your payment history – note your perfect on-time payment track record.
  • Inquire about “graduation” offers – they may have pre-qualified you for an upgrade.
  • Be polite and patient – remember representatives can only work within company policy.
  • Consider applying separately – if denied, you can always apply for a new unsecured card.

With a demonstrated history of paying secured balances responsibly, many issuers will agree it’s time to graduate your credit and offer you an unsecured card.

Is a secured card worth it?

Despite requiring an upfront security deposit, a secured credit card is generally worth it for these reasons:

  • Rebuild credit – Make monthly payments on time to establish positive history.
  • Fairly easy to qualify – Secured cards are available even with poor/no credit.
  • Deposit is refundable – Get your deposit back after graduating to unsecured cards.
  • Lower costs than alternatives – More affordable option than payday loans or other subprime lending.
  • Chance to qualify for better cards – Secured cards can help you ultimately get approved for premium rewards cards.

The deposit and high interest rates are disadvantages. However, used properly, secured cards allow consumers with poor credit access to an affordable credit-builder product.


When using a secured credit card responsibly, experts recommend keeping your monthly spending below 30% of your credit limit to maintain a low credit utilization rate. Make sure to pay at least the minimum payment by the due date each month, and strive to pay your balance off in full to save on interest charges. Limit applications for additional credit in the beginning and avoid maxing out your card.

With diligent monthly payments and below-30% utilization for about 12 months, a secured card can help rebuild your credit to potentially qualify for unsecured cards in the future. Be patient, focus on developing positive habits, and your credit scores will improve over time. Most secured card users find the benefits of credit access and credit building outweigh the costs as long as they stick to a responsible usage plan.

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