What Is a Semi-Secured Credit Card? Benefits and Risks

A semi-secured, or partially secured, credit card requires you to back the card with a deposit before you receive 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.

A semi-secured card can provide a credit line for people with lower credit scores who want to rebuild their credit history. It can also provide cardholders with convenience of using a credit card to make purchases.

How a Semi-Secured Credit Card Works

Banks typically won’t approve non-secured credit cards for people who have "very poor" credit scores (below 500), which can include people who have never had credit or those who have defaulted on loans or gone through bankruptcy. However, if you have no credit or poor credit you might be able to get a secured or semi-secured credit card. These cards can help you build credit history and provide the convenience of making purchases with a credit card.

A secured credit card can be often be the only option for people who have no credit or low credit scores. 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 if the cardholder defaults on payments.

The semi-secured card is an option for people who have some established credit, say with a secured credit card, and may have improved credit scores that still don't qualify for non-secured cards. These cards still require a deposit, but they provide some credit beyond that amount. For example, a secured card may require a deposit of $200 and provide a credit line of $500.

Banks tend to charge higher interest rates on semi-secured cards than on traditional non-secured credit cards, to compensate for the default risk they take on. Some semi-secured cards have other requirements, such as an annual fee.

Example of a Semi-Secured Card

Semi-secured cards can be ideal for someone trying to build their credit. For example, say you have a credit score of 580 and cannot qualify for a non-secured credit card, but you want access to credit to make purchases more easily, such as paying for gas.

You can apply for a semi-secured credit card at your bank or credit union. If you are approved, you will put down a deposit amount such as $500 and then receive a larger credit line, such as $800.

You can use the credit card just as you would a non-secured credit card. You will make monthly payments toward the outstanding balance and any remaining balance will be carried over to the next month. You will be charged interest on any balance you carry over. If you make payments on time, your credit score will likely benefit and could then potentially qualify for a non-secured credit card with a lower interest rate.

The BankAmericard Secured Credit Card and Capital One Platinum Secured MasterCard are two examples of semi-secured credit cards.

How to Get a Semi-Secured Credit Card

Usually, a semi-secured card is a transition stage from a fully secured card. If you have a fully secured card and make regular payments for, say, several months to a year, your credit card company may offer a semi-secured credit card with an extended credit limit and no requirement for an additional deposit.

In some cases, you apply directly for a semi-secured credit card. You will likely need a credit score in at least the "fair" range (580-669), along with a documented ability to make payments. Semi-secured cards are not as common as secured credit cards, so you may have to research several credit card issuers' offerings.

The Bottom Line

A semi-secured credit card can be a useful financial tool for people aiming to improve their credit scores. However there are downsides to consider as well, such as the risk of losing your deposit if you cannot make payments. Review the interest rate terms and annual fees of several semi-secured cards before determining which card may be best for your situation.