What is a Secured Credit Card and How Does It Work in the Philippines?

If applying for a regular credit card doesn’t work out for you, you can always get a secured credit card.

It's not always easy to get approved for a typical credit card, especially for first-timers who don't have enough income documents or have not established good credit standing yet. Banks are not too keen on applicants with bad credit or no credit history.

Enter secured credit cards that work like any traditional credit card but are easier to get approved for. Here, we explain how secured credit cards work and list down the banks in the Philippines that offer them.

What is a Secured Credit Card?

A secured credit card is a type of credit card that requires collateral in the form of a cash deposit. Because it's guaranteed by the prospective cardholder's deposit, applicants can expect quick and 100% approval, making it the easiest way to get a credit card in the Philippines.

What is the Difference Between a Secured Credit Card and a Regular Card?

Secured credit cards have the same features as their regular version. The only difference is that you have to open a savings or time deposit account with the issuing bank. You also need a hold-out deposit, a percentage of which determines your credit limit. 

Generally, banks that offer secured credit cards require a minimum hold-out deposit of ₱10,000 to ₱100,000 in one's savings or time deposit account. From this amount, your credit limit can range from 70% to 95%, depending on the issuing bank and your preferred deposit account type.

The higher your deposit, the higher your credit limit. For example, if your hold-out deposit is ₱100,000 and the credit card limit is 95% of that amount, then the actual limit on your card is ₱95,000.

You can't withdraw your hold-out deposit until you clear and settle your balance. Aside from this, you also need to formally request a card cancellation or a lifting of your hold-out deposit.

This won't be a quick process, though. It usually takes around two months for banks to release the hold-out amount. But from that point on, you should be able to withdraw your cash.

Is It a Good Idea to Have a Secured Credit Card?

Banks don't require income documents for secured credit card applications, so these cards are ideal for people with bad credit or no credit history. The deposit amount already reduces the risk to the issuing bank in case the cardholder fails to fully pay their balance on time.

This feature also makes getting a secured card a good idea for first-time cardholders, low-income earners, and self-employed people with unstable incomes.

Even those with a regular credit card in good standing can benefit from a secured card. If the bank approved a low credit limit on your card, you can apply for a secured credit card to get a higher credit limit (that is, if you can deposit a considerable amount to your account).

To decide if this is indeed the right financial tool for you, weigh the pros and cons of secured credit cards.

👍 Advantages of Secured Cards

• You can get approved even if your credit card application is always denied. You can qualify even if you have bad credit or no credit history.
• Proof of stable income is not required.
• The credit limit is more predictable, as it's a percentage of the hold-out deposit. You can have a higher credit limit by increasing your deposit.
• Having a secured card helps build a good credit history or improve your credit score. If you use your card responsibly and make payments on time, this will reflect in your credit report and boost your creditworthiness.
• No agent from debt collection agencies will chase you for any missed payment. The bank would just take out the unpaid balance from your hold-out deposit.
• Your deposit may earn interest if your account is an interest-bearing one.
• You may qualify for a regular credit card if you make consistent on-time payments on your secured card.

👎 Disadvantages of Secured Cards

• A security deposit is required. You can't access your funds—even for emergencies—until your account is closed.
• The credit limit is tied to the hold-out deposit. If you can't make a large deposit, you'll have to make do with a low credit limit.
• Missed payments can still hurt your credit score.

What is the Best Secured Credit Card in the Philippines for 2023?

Banks like AUB, BPI, China Bank, Metrobank, RCBC, and Security Bank offer secured credit cards in the Philippines. There are so many cards to choose from, but the best secured credit card will depend on which one meets your requirements.

If you're looking for rewards, cashback, or annual fee waivers, there's a secured credit card for that. You might also want a card with the lowest deposit requirement, the highest credit limit, or both.

Check out this comparison table of secured credit cards in 2023:

Secured Credit Card	Available Card	Minimum Deposit	Credit Limit
AUB Secured Credit Card	Any AUB credit card	₱25,000	80% of deposit guarantee
BPI Express Start	Any BPI credit card	₱15,000	90% of the hold-out deposit amount
China Bank Secured Credit Card	Any China Bank credit card	₱30,000 or US$750	85% of the security deposit (for Peso deposit accounts) / 70% for Dollar deposit accounts
Metrobank Save & Swipe	Any Metrobank credit card	₱12,000	90% of the hold-out deposit
RCBC InstaCard	Any RCBC credit card	₱10,000 or US$2,000	95% of the hold-out deposit
Security Bank Fast Track	Gold Mastercard, Platinum Mastercard, and Next Mastercard only	₱25,000 for savings account / ₱100,000 for time deposit	80% of the hold-out deposit

How to Apply for a Secured Credit Card in the Philippines

Decided on a particular secured card already? A secured credit card application is generally a smooth and straightforward process in the Philippines. It's even simpler than getting a regular card. Just follow these steps:

1. Ensure That You're Eligible for a Secured Card

Although it's easier to qualify for a secured card than a regular card, you'll still have to meet the bank's eligibility requirements.

First, you have to be at least 21 years old. Also, you should be able to present a valid government-issued ID, as it's required by banks like RCBC and Security Bank.

Most importantly, you shouldn't have a delinquent account with the bank which you'll get a secured card from.

2. Choose the Right Credit Card for You

Any credit card in the bank's lineup can be availed of as a secured credit card (except for Security Bank, which limits its secured card options to just three). If you're trying to build a good credit score, it's best to select the card that will work for you, preferably one that fits your budget, needs, and spending habits.

Shop around for options at the bank's website. Or instead, save time and effort with Moneymax: compare credit cards online to find the right one for you.

3. Visit the Bank to Apply

Once you've decided on the credit card to apply for, go to the nearest branch of your bank of choice to open a savings account or time deposit for your application.

Make sure to bring your valid IDs and the amount for your hold-out deposit. If you're an expat or foreign resident, bring your work permit, Alien Certificate of Registration (ACR), or embassy accreditation documents just in case the bank asks for it.

4. Submit the Required Documents

The bank staff will ask you to fill out and sign forms, such as a credit card application form, savings account opening forms, and a Deed of Assignment.

A Deed of Assignment is a legal document in which you authorize the bank to hold your deposit amount. In case you default on your payments, the bank can debit the hold-out amount to settle your unpaid balance.

5. Wait for the Card Delivery

The approval rate should be close to 100%. After all, you don’t put in a deposit for anything.

Processing of secured credit cards in the Philippines takes around three to 10 banking days. It may be delivered to your address, or you may need to pick it up at the branch where you applied for it.

Moreover, you'll also need to activate the card by calling the issuing bank's customer hotline.

See also: AUB Credit Card Application in 6 Easy Steps

How to Use a Secured Credit Card

Not sure how to use secured credit cards? Use them like regular credit cards at any store or merchant that accepts Visa or Mastercard. You can also take advantage of typical benefits like welcome gifts, installment plans, rewards, cashback, and other perks, depending on the card you choose.

Secured cards also have the same fees and charges, as well as interest rates, as regular credit cards.

With this type of card, you’re still expected to make monthly payments. But if you default on a payment, the bank will take out the unsettled balance from your hold-out deposit.

Thus, you should manage your spending to make sure this never happens. If your hold-out deposit reaches zero, you won’t be able to use your secured credit card anymore.

The most common reason people opt for a secured credit card is because of their negative credit history. If you fail to keep or manage, it will be another negative blow to your credit score.

Secured Credit Card FAQs

1. Which secured credit card has the lowest deposit?

As of 2023, RCBC requires the lowest minimum hold-out deposit of ₱10,000 for a secured credit card. RCBC InstaCard also has the highest credit limit of 95% of the hold-out deposit.

Related: Quick and Easy RCBC Credit Card Application Guide

2. How to apply for a secured credit card online?

Online application for secured credit cards is not being offered by banks for now. You need to complete a walk-in application at the bank's nearest branch because you'll have to open a deposit account, which is something you can't do online.

3. How to cancel a secured credit card?

You may contact the customer service hotline of your issuing bank to request card cancellation. When doing so, make sure to ask if there's any fee for canceling your secured card.

For example, BPI charges cardholders an Express Start cancellation fee of ₱1,500 for canceling a secured BPI credit card before its first-anniversary date.

4. Can I convert my secured card to a regular credit card?

Yes, it's possible if you can show enough proof of income or if you’ve been paying your credit card bills on time and in full amount for at least a year. Once you’ve converted your secured credit card to a regular one, you can start withdrawing from your deposit without having to cancel the card.

Furthermore, your secured card can help improve your chances of getting approved for a regular card, as long as you've maintained good credit standing with your secured card provider.

Further reading: Consider These Credit Card Advantages and Disadvantages Before Getting One

Final Thoughts

Secured credit cards are a good alternative to traditional credit cards in the Philippines, especially if you don't have enough proof of income or you want a higher credit limit. 

Having a secured credit card is a great opportunity to get your finances on the right track, so don't waste this chance. When used responsibly, a secured card can help you build your credit and raise your chances of getting approved for credit cards and loans in the future.

Sources:

• AUB Secured Credit Cards page
• China Bank Secured Credit Card page
• RCBC InstaCard Secured Card page
• Security Bank Fast Track Secured Credit Card page