Secured credit cards vs. unsecured credit cards

If you're looking for a new card but don't have much of a credit history, you may have come across secured credit cards during your research and wondered how they differ from regular — or unsecured — credit cards. While both secured credit cards and unsecured credit cards have a lot in common, there are a handful of key differences, such as a security deposit.

Below, Select breaks down the key differences and similarities between secured credit cards and unsecured credit cards.

A secured credit card is nearly identical to an unsecured credit card, but you're required to make a minimum deposit (known as a security deposit), to receive a credit limit. The deposit is typically $200, but may be higher or lower depending on the secured card you open.

The Capital One Platinum Secured Credit Card (see rates and fees) offers applicants the chance to qualify for a card with a deposit lower than $200. You could put down a refundable security deposit starting at $49 or $99 deposit and still receive a $200 initial credit line.

Secured cards are often marketed toward people looking to build or rebuild their credit. As a result, the security deposit acts as collateral if you default on payments, but it's completely refundable if you upgrade to an unsecured card or pay off your balance in full and close your account.

The Discover it® Secured Credit Card gives cardholders a clear path to upgrading to an unsecured card. Starting at seven months from account opening, Discover will automatically review your credit card account to see if they can transition you to an unsecured line of credit and return your deposit. This takes the guesswork out of wondering when you'll qualify for an unsecured credit card.

After you make the minimum security deposit, you can start using your secured card just like any other credit card. You can spend up to your credit limit, which is often equal to your security deposit. So a $200 security deposit equals a $200 credit limit. If you want more spending power, you'll need to deposit more money. The maximum amount you can deposit varies by secured card, but can be up to $2,500.

Some secured cards, such as the Capital One Platinum Secured Credit Card (see rates and fees), may offer a higher credit limit (with no additional deposit required) after you make the first five monthly payments on time, which is also a great incentive to practice responsible credit behavior.

You will incur interest charges if you carry a balance month to month, so make sure you pay your bill in full and on time, which also helps your credit score.

Actions you take with a secured card are reported to the three main credit bureaus (Experian, Equifax and TransUnion), so it's crucial to avoid maxing out your card and paying off your balance each month.

Trying to decide between a secured or unsecured card? Your credit score might play a big role in your decision-making.

If you have less-than-stellar credit, a secured credit card may be the better option since they're typically easier to qualify for with poor credit (scores below 580) or no credit.

If your credit is already good or excellent (scores 670 and greater), an unsecured card can provide you with better benefits that may earn you rewards in common spending categories, such as dining, gas and groceries, Global Entry or TSA PreCheck credit and added entertainment perks. Check out our round up of the best credit cards.

If you decide that a secured card is the best option, consider some of the best secured credit cards listed below. Once you improve your credit, you can transition to an unsecured card.

If you can't afford the $200 security deposit, you should look to other ways to raise your credit score, including becoming an authorized user on someone else's account. You might also want to look for a card geared toward consumers with low credit that don't require a deposit. CNBC Select has a few suggestions in our roundup of the best cards for building credit. 

There are tons of secured cards available, but some may charge an annual fee or have minimum security deposits over $200. Here are some of the best secured credit cards that have no annual fee and deposits of $200 or less.

For rates and fees of the Discover it® Secured Credit Card, click here.