Whether you sell your products over the internet, in person, or both, you will need to accept credit cards. Because they have become a virtual necessity for customers, financial institutions have created what is known as a secured credit card to assist patrons who have a poor or limited credit card history. 

But just what are secured credit cards, and is there anything you need to know as a seller before you start accepting them?

Secured credit cards defined.

Issuers furnish secured cards to people who might otherwise be shut out altogether from making purchases. Although they carry a small credit limit, they function like their traditional unsecured counterparts.

If someone’s credit is poor or if they do not have a credit history in the United States, a secured card is often the only viable option. This solution requires that the user pay a cash deposit that is held by the bank for the duration of a customer’s use of the card. 

The holder’s credit limit is usually the same as the amount of the security deposit. Generally, deposit amounts range between $200 and $5,000, and are held by the bank until the account is either closed or upgraded to an unsecured card.

Consumers gain advantages from obtaining this type of card. For starters, it enables them to make the non-cash payments that have become the rule in today’s commercial environment. 

Additionally, responsible use of this card enables holders to build a stable credit card history that ultimately raises their score and makes them candidates for other less restrictive options.

Accepting secured cards: the merchant’s perspective.

Merchants often wonder whether it makes sense to accept secured cards. Common concerns include payment processing differences, security, risk, and cost.

As a seller who wants to minimize fraudulent transactions and take all possible steps to ensure the safety of your business, you may be wondering if it is smart to accept a secured credit card. As it turns out, secured credit cards function within the standard credit card network and, as such, are treated no differently from the unsecured types.

To illustrate this point, processing a secured card is identical to accepting a payment from someone holding an unsecured one. Because your payment processor and the system you use to take payments see no difference, you don’t need to distinguish between them at all. 

In fact, the transaction moves along in the same way for both types, including authorization request, completion, and settlement.

Although even secure credit card processing involves some risk, the jeopardy to the merchant is no higher with a secured account. That’s because payments from secured credit card accounts still operate fully within the standard card network. 

That being said, sellers should always be vigilant about fully complying with the Payment Card Industry Data Security Standard (PCI DSS) to protect cardholder data. Additionally, they should be consistently vigilant about watching for fraud, and keeping chargebacks to a minimum.

The bottom line is that secured credit cards offer customers the opportunity to raise their credit score and conduct non-cash purchases, while simultaneously posing no added risk whatsoever to merchants. 

The deposit customers pay acts as collateral, lowering the risk to the provider. 

Because accepting secured cards is no different from other transactions, you should be prepared to welcome all credit cards regardless of their secured status. Doing so helps to provide a smooth and frustration-free payment experience for all shoppers.