Secured credit cards don’t exist in Australia — here are some alternatives

What is a secured credit card?

In Australia you get approved for a credit card with an agreed credit limit. That's the maximum amount you can borrow. You don't have to offer any asset or cash as a security deposit.

In the US and some other countries, people with low incomes or poor credit scores can get a secured credit card. Customers have to offer a small cash deposit or link to a savings account when they get the card.

A way to build credit

Secured credit cards only let you spend a limited amount. They often have higher rates and fees too. They are a way for customers to safely establish or improve their credit scores.

Similar to other credit cards, you get a regular statement and need to pay at least the minimum amount. Interest charges also apply to any unpaid balance on the card.

But if you missed a repayment or defaulted on a secured card, the lender could use part of the security to recover the debt.

Features of a secured credit card

• Credit limit. A secured credit card is a line of credit from a bank. A cash deposit of your own money is typically used as a security. It's typically relatively low to start with (as low as $100 or $200).
• Security. The security is held in an account by the credit card provider for a period of time (18 months for example). The security deposit does not earn interest.
• Interest-free days. Get up to 25 days interest free on your card purchases when you pay back the card balance by the statement due date.
• Interest charges. Interest charges apply on any balance you have not paid by the statement due date.
• Credit tracking. The credit card provider will send reports to credit agencies about your repayment history.

Finder survey: How satisfied are Australians with their experiences with personal loans?

Alternatives to secured credit cards in Australia

Low rate credit cards

If you want to improve your credit score, you could apply for a low rate credit card with a low credit limit.

Consider cards with minimum credit limits between $500 and $2,000 that could help you manage repayments. You do need to have good credit history and a regular income to get a credit card.

Spend a little on the card and always pay it off on time. Be sure to check your credit score and see if you have any missed or late payments you need to pay off too.

Secured personal loans

A secured personal loan lets you borrow a set amount of money over a fixed term. Similar to a secured credit card, the loan's value is tied to an asset, such as a car, home or even savings you have in a term deposit account.

This security means lenders may consider people with bad credit or casual employment. Taking out a personal loan will lower your credit score initially. But if you pay it off on time it will eventually help improve your credit score.

Short term loans

Also known as payday loans, short-term loans allow you to borrow amounts up to around $2,000. This is one of the easiest ways to get a small amount of credit, but it's the most expensive and risky.

Payday loans very high fees that may increase the risk of debt, which could hurt your credit score.

Frequently asked questions

• Who are secured credit cards suited to?

  Secured credit cards are usually designed for cardholders who have bad credit and want to use a card to rebuild their credit history. Unfortunately, as they're not available in Australia at the time of writing, you'll need to consider other alternatives.

• Why aren’t secured credit cards provided in Australia?

  Due to the credit laws secured credit cards are not offered by Australian credit card providers.

  Some Australian banks, such as ANZ Bank, offer secured credit cards via some of their US branches, in Guam and in Singapore but not within Australia.

• Where are secured credit cards available?

  Secured credit cards are available from several lenders and credit card providers across North America. To a much lesser extent, these types of accounts can also be found in Great Britain and Canada, but these are becoming rarer.

• How does a secured credit card differ from a secured debit card?

  A secured credit card offers a line of credit that you can spend and repay over time, with a cash deposit or other security linked to the account. As a form of credit, it helps build your credit history and can affect your credit score.

  In comparison, a debit card is linked to your transaction account and allows you to spend money you earn and save. As debit cards are not a form of credit, it's easy to apply and open an account even if you have a bad credit score or are bankrupt. It also doesn't affect your credit score.

• Can secured credit cards be used for bankrupt people to rebuild their credit record?

  The US uses a credit scoring system for banks and lenders to determine how responsible a customer is with their finances. It’s common for bankrupt people to apply for a secured credit card to help improve their credit history.

  A secured credit card provider sends reports to credit reporting agencies about your repayment history. If you have a good repayment history, it will help improve your credit history.

Written by

Sally McMullen

Journalist

Sally McMullen is a journalist with five years of experience covering credit cards and consumer finance. As co-host of the Two Broke Chicks podcast and co-author of Rich In Life, Sally shares valuable money-saving tips and life lessons with her audience. Sally was a Credit Cards Editor at Finder from 2015 to 2020. See full bio

Co-written by

Richard Whitten

Money Editor

Richard Whitten is Finder’s Money Editor, with over seven years of experience in home loans, property and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Graduate Certificate in Communications from Deakin University. See full bio

Richard's expertise

Richard has written 605 Finder guides across topics including:

• Home loans
• Property
• Personal finance
• Money-saving tips