Home > 2011 > Credit Cards > Credit Card Q&A: Are Secured Credit Cards Protected by the Credit CARD Act of 2009?

Credit Card Q&A: Are Secured Credit Cards Protected by the Credit CARD Act of 2009?

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Credit Card Question: Secured credit cards sure have a lot of fees. Are these cards protected by the Credit CARD Act of 2009?


Answer: Hi Fred,

Yes, indeed, secured credit cards are protected by the CARD Act. The CARD Act exempts small business credit cards, but it does cover secured credit cards.

The CARD Act even went a little further in protecting secured credit cards. Secured credit cards are targeted to those with less-than-perfect credit and you’re correct that quite a few of these cards are riddled with fees. The CARD Act limits the amount of fees that issuers can charge during the first year to 25 percent of the credit limit on the account.

These fees include items such as application fees (also called processing fees) and annual fees. So if your credit limit is $400, you can’t be required to pay fees in excess of $100 during the first year. But if you’re charged a penalty fee, such as for a late payment, the amount you owe can exceed the 25 percent limit.

Your secured credit card also enjoys the other protections of the CARD Act, such as 45-day advance notice of significant changes to the terms of your card. If you get a notice of an interest rate increase, though, note that the actual rate increase is applied to purchases you make just 14 days after the notice is mailed. But you will get 45 days before you have to pay the higher rate.

After the first year, fees may begin cropping up so always read your mail. Use a secured credit card responsibly and over time, you’ll rebuild your credit history. Once you qualify for an unsecured credit card, you’ll have more credit card choices and better terms to choose from.

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Image: Diego Torres Silvestre, via Flickr.com

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  • William Hannah

    I have a secured credit card for which I closed the account. The amount deposited for security more than covers the balance on the card, but the credit card company wants me to pay off the card (and pay interest on it until it’s paid off even though the account is closed and cannot be used) rather than using the amount already deposited with them. Is this legit? The bank the card was originally on failed, and now the card is with a different bank that is almost impossible to get in touch with. I’m afraid that if I pay off the balance, I’ll never get my security deposit back. Any ideas on this? Thank you.

    • Gerri Detweiler


      It is very common for secured card issuers to treat your deposit separately from your balance. It’s similar to when you place a security deposit on an apartment. You still have to pay last month’s rent and leave the apartment in good shape in order to get your security deposit back.

      If you fail to make your payments on a secured card, the issuer may report you as late to the credit reporting agencies and you definitely don’t want that to happen. So I recommend you at least make your minimum payments on time to protect your credit.

      But it does sound like you have a legitimate concern about your ability to get your deposit back. There are a couple of things you can do.

      1. You can research the safety and soundness of the bank that currently has your deposit.

      2. You can find out who the banking regulator is for the new bank that holds your deposit. Be prepared to contact them if you have trouble getting your deposit back. Hopefully it won’t come to that, but if it does, at least you’ll know where to turn.

      3. Keep good documentation of everything: statements, as well as your request to close the account and have your deposit refunded. Send any written correspondence via certified mail and print out screenshots of any online requests.

      Let us know how this goes for you!

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