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Secured Card Credit Limits Based on Deposits

Secured Card Credit Limits Based on Deposits
Secured Card Credit Limits Based on Deposits

Secured Card Credit Limits Based on Deposits

Secured credit cards require an upfront security deposit to establish the line of credit. In most cases, the size of your deposit directly determines the initial credit limit you can qualify for. Understanding how issuers set limits based on deposit amounts can help you choose the right card.

How Secured Card Deposits Work

With a secured card, the issuing bank will hold a cash deposit as collateral for the account. This provides security for the lender since there is no established credit history. Your deposit equals the credit limit approved.

The deposit does not get applied towards your purchases or statement balances. It remains in a secured account to back your line of credit. You still need to make monthly payments like a regular credit card.

As you demonstrate responsible usage and on-time repayment over time, the issuer may increase your credit limit above the original deposit amount. Eventually lenders may transition successful borrowers to unsecured cards and refund the security deposit.

Factors That Influence Credit Limits

In addition to the size of your deposit, other factors play a role in determining credit limits offered for secured cards:

Credit Score

Issuers will check your credit report and FICO or VantageScore. In general, the higher your credit scores, the more likely you are to qualify for a higher initial limit. Limited or poor credit typically results in lower limits.

Income

Lenders want to see you have enough steady income to manage ongoing payments. Verifying higher monthly or annual income often allows approval for larger credit limits.

Existing Banking Relationships

Some issuers offer secured cards specifically to current account holders. An existing savings or checking account in good standing may help get approved for a higher limit than going to a new lender.

Utilization on Other Cards

If you already have other unsecured cards, keeping balances low compared to limits demonstrates responsible usage. Lower utilization can help qualify for higher limits when applying for a new secured account.

See also  Balance Transfer Options for Secured Credit Cards

Average Deposit and Limit Amounts

While individual factors determine your exact credit limit, here are some averages by top secured card issuers:

Capital One Secured Mastercard

  • Average Deposit: $49 – $200
  • Average Limit: $200 – $1,000

Capital One offers a guaranteed $200 credit line with just a $49 security deposit for applicants new to credit. Even those with poor credit can qualify. Higher deposit amounts can result in larger limits.

Discover it® Secured Card

  • Average Deposit: $200 – $2,500
  • Average Limit: $200 – $2,500

Discover typically matches the credit limit to your security deposit, so be prepared to make a deposit equal to your desired line of credit. Most applicants fall within the range of $200 to $2,500.

Citi Secured Mastercard®

  • Average Deposit: $200 – $2,500
  • Average Limit: $200 – $2,500

Citi also links the size of your deposit directly to the approved limit amount. Expect your credit line to equal the amount of your security deposit payment.

Bank of America® Customized Cash Secured

  • Average Deposit: $300 – $4,800
  • Average Limit: $300 – $4,800

As a major bank, Bank of America requires full collateralization but provides higher maximum limits. The full approved credit line must be deposited upfront as security.

Wells Fargo Secured

  • Average Deposit: $300 – $5,000
  • Average Limit: $300 – $5,000

Wells Fargo offers one of the highest maximum limits but requires borrowers to fully secure the line with a matching deposit. Be ready to deposit the entire amount of credit extended.

Strategies to Increase Credit Limits

While your deposit sets the initial limit, there are ways to potentially get higher limits approved over time:

Ask for Limit Increases

After 5 months of on-time payments, contact your issuer to request a credit limit increase. This allows you to graduate to a higher limit without placing another deposit.

See also  Can Secured Cards Help Improve Bad Credit?

Supplement with Installment Loans

Small installment loans or credit builder loans can add additional positive history. Mixing credit types boosts your score.

Become an Authorized User

If a spouse or family member adds you as an authorized user to a current card, their payment history can help strengthen your credit profile.

Maintain Low Utilization

Keep balances low relative to limits on all cards. Under 30% utilization helps scores optimize.

Enroll in Credit Monitoring

Sign up for a free service to monitor your credit reports and scores. Watch for opportunities to apply when your scores increase.

Improve Credit Factors

Pay all bills on time, resolve any errors on your credit reports, and keep old accounts open. A higher score can translate to a higher limit.

How Credit Limits Impact Approval Odds

The size of the credit limit you request influences approval chances since it determines the required deposit amount:

Minimum Limits

Most issuers start at $200 for secured card limits. This minimizes the deposit required. Lower limits get approved more readily when initially establishing credit.

Maximum Limits

Every secured card provider sets their own ceiling for credit limits. Generally, the maximum approved limit ranges from $1,000 up to $5,000 or more. Higher limits require larger security deposits, so may be harder to qualify for.

Match Limit to Deposit

Applying for a limit that matches the deposit amount you can comfortably afford improves approval odds rather than requesting an amount above your deposit capabilities.

Initial Use Goals

Think about your intended credit usage. If you plan to make smaller monthly purchases, a lower limit in the $300 to $500 range may suit your needs while requiring a more reasonable deposit.

Credit Profile Factors

Aim for a limit in line with your credit history length and score range. Secured issuers grant higher limits to applicants demonstrating responsible usage and on-time repayment experience.

See also  Best Secured Cards to Rebuild Credit Fast

Limits When Graduating to Unsecured

As you continue using your secured card responsibly, the issuer will periodically review your account for graduation to unsecured credit:

Refund Original Deposit

Once transitioned to unsecured status, your original security deposit will be released and refunded to you. This allows you to use the full approved line of credit without a deposit.

Increase Limit

The card issuer may offer a higher credit limit when graduating the card. This recognizes your good payment history and allows greater usage on an unsecured basis.

Accept Lower Limit

There is a chance the issuer only agrees to graduate your account if you accept a lower credit limit. This limits their risk by reducing the unsecured line extended.

Open New Card

Rather than transitioning your secured card, the lender may have you apply for one of their unsecured card offers approved based on your improved score. Your secured account would then be closed when approved for the new card.

Key Points to Remember

Keep these tips in mind when applying for initial or increased limits on secured credit cards:

  • The size of your security deposit directly correlates to the credit limit extended in most cases. Be ready to deposit the full approved amount.
  • Request a limit in line with your available deposit funds and intended usage needs. Minimum $200 limits are easiest to qualify for.
  • Maintain on-time payments, low balances, and credit monitoring to maximize your chances for higher limits.
  • Try to get limits increased without another deposit before considering applying for a new secured account.
  • Graduation to unsecured cards brings potential for deposit refunds and higher credit limits.

Matching your credit limit request to the security deposit you can afford makes approval most likely as you establish positive history with secured cards. Responsible usage paves the way for higher limits and graduated unsecured offers over time.

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