December 5, 2023

We all know consumer budgets are starting to get tight as inflation and the cost of living rise.Credit balances are growing, according to recent poll, only 40% of consumers said they were confident they could raise $2,000 for an emergency in the next month. Consumers often rely on short-term forms of credit such as credit card products in times of need, which can lead to long-term problems if not managed properly.

For customers with poor credit history, weak files, or even no credit history, secured card products offer the opportunity to build a credit score. For those unfamiliar with “secured cards,” they are revolving credit cards that require banks to hold a certain amount of collateral in order to establish a line of credit. This collateral is typically held in a savings account and is only available after a customer upgrades from a card to a higher-tier card product. Graduation usually takes the form of an offer for an unsecured credit card product.

Most of the largest card issuers in the United States have at least one secured card. These programs are an important part of the market, supporting efforts to build access to the latest Press releaseKeyBank just revealed the metrics behind the success of its secured credit card program:

  • 46% of KeyBank secured credit cards do not initially have a FICO score.
  • 54% started with a low FICO score.

KeyBank reports that 42,000 customers have used the secured credit card program since its launch in 2019, and more than 20,000 have graduated from the program. The company reports that 95 percent of cardholders graduate within 24 months. Improvements in FICO scores are documented below:

  • Starting without FICO score: Graduation average of 728 FICO score
  • Starting FICO scores: Average increase of 63 points upon graduation

These major improvements will help cardholders access new forms of credit, such as travel and rewards card products, installment loans and mortgages. For card issuers, secured cards are often paired with savings accounts, presenting ample opportunities to cross-sell new product lines to customers.For more information on security cards, see the most recent Report Javelin Strategy & Research examines the importance of these products.

overview ben dannerSenior Research Analyst Javelin Strategy and Research.