Credit Card Question & Answer

Advertising Disclosure is an independent, advertising-supported web site. receives compensation from many credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » Questions » User Questions » Other » If you deposit $300 in an account, how are you getting credit if you use up the $300?

If you deposit $300 in an account, how are you getting credit if you use up the $300?

Answered by , at
Add to Favorites:

Tags: , ,

Leo Zhu

That depends on whether you’re talking about a prepaid card, or a secured credit card. These are two different things, both of which require putting money down up front. I’m guessing you mean a secured credit card, but since we do offer both secured credit cards and prepaid cards through our site, I’ll briefly explain how both of them work.

A prepaid card isn’t a credit card at all, so in that case, there’s no credit issued. You simply load the card with the amount of money you’d like on it, and then use it until it’s gone – sort of like a store gift card.

A secured credit card is a credit card for people with poor credit, and it requires a deposit to act as collateral, in case you default on your card agreement. The security deposit you put down will generally be the same amount as your credit limit, although some prepaid cards may give you a credit limit at a slightly higher percentage than the deposit.

When your credit limit is the same amount as you deposited in the first place, you are right to wonder how you are getting credit at all. The advantage of having a secured credit card is that if your credit history is bad, it can be a stepping stone to a higher credit score and the ability to get a regular, unsecured credit card. With regular, timely payments, your credit history will improve – as long as the prepaid card reports to major credit bureaus. If you are shopping for a secured card, always make sure the one you apply for reports to credit bureaus, or else it won’t be worth having.

Get the latest news, articles and expert advice delivered to your inbox. It's FREE.
You could turn $200 into $400 with Cashback Match™. Get a dollar-for-dollar match of all the cash back you’ve earned at the end of your first year, automatically.
For Excellent, Good Credit
Unlimited 1.5x rewards on every purchase, every day. For every $1 you spend, you earn 1.5x Miles.
For Excellent, Good Credit
No Annual Fee
For Bad Credit

Other Questions in