Have no credit history (or bad credit) and want to get a credit card? The bad news is, you will be rejected for almost all regular credit cards. But here's the good news: you can still get a secured credit card or a debit card.

Do you know the differences between these two types of cards? Are you confused and trying to figure out if you should get a secured credit card or a debit card?

Before you decide which is the better option for yourself, you should first learn the differences between a secured credit card and a debit card.

Secured Credit Card vs. Debit Card

These are the two major differences between secured credit cards and debit cards:

  1. A debit card transfers the money directly from your account into the account of the merchant from which you are purchasing the product or service. The amount you spent is directly deducted or debited from the money you already have in your account. Once a debit is made, you will see your account balance decrease immediately.

    A secured credit card, on the other hand, requires a security deposit which acts as collateral for your line of credit. Once you have deposited the money into the account, you can use the secured credit card to purchase items. The security deposit can be as low as $200 to as high as $10,000, and your credit line is usually a percentage of your deposit, ranging from 50% to 100%. The security deposit in your secured credit card account is only there as a backup, in case you don't pay your bills on time, that money would be withdrawn from your account so as to pay off your balance.

    When you buy something, your money doesn't go directly from your bank account to the merchant's account, instead, when you purchase something, you are creating a balance which you must pay off by the due date of each month, and if you don't, you will incur high interest rates and get into debt if you are not careful.

    A secured credit card functions exactly like a regular credit card, and can be used to make car rental, hotel or restaurant reservations, unlike a debit card. There are many things which are quite impossible to do without a credit card, so having a secured credit card will make life much easier for you.

  2. The second difference, and also the most important difference, is that secured credit cards allow you to build up your credit history or improve your credit score, whereas debit cards don't.

    Secured credit cards report to all the 3 major credit card bureaus in the U.S. This means that if you have been diligent in paying on time and not exceeding your credit limit, your credit score will start increasing and you can later enjoy the benefits of having a better credit score.

    This advantage makes secured credit cards the perfect choice for students and young people who have never had credit cards and haven't yet been able to apply for a regular credit card, but would like to build up their credit score in the meantime so that they are eligible for a good credit card in the future.

Want To Build Credit Or Improve Your Credit Score?

If you do not have a good credit score or have no credit history at all, chances are you would be denied regular credit cards. In that case, having a secured credit card will help you improve your credit score so that you can get the credit card you want in the future.  Debit cards, on the other hand, do not help you build a credit history as they do not report to credit rating agencies.

Is A Secured Credit Card For You?

Given these key differences between debit and secured credit cards, you should now have a better idea of which type of card you should go for.

If you are looking for a card that will help you improve your credit, a secured credit card might be just what you're looking for.

What you must remember though when having a secured credit card is that even though you have a credit card, it doesn't mean you should use it recklessly since you are not spending 'your' money, but the bank's money.

Use your secured credit card responsibly. Pay off your balance in full by the due date every month and be careful not to overspend. If you pay off your balance in full and on time every month, you will avoid paying any interest charges and will reap all the benefits a secured credit card has to offer.