Dr. Vaneesha Dutra, Full and Endowed Professor of Finance at Morehouse College, was recently featured as a national expert on WalletHub, one of the leading personal finance websites in the U.S., offering insight into the banking industry’s practices around secured credit cards.With extensive experience in financial markets, economic equity, and banking operations, Dr. Dutra provided expert commentary on how secured credit cards function and how banks generate revenue from these widely used financial products.
In her analysis, Dr. Dutra explained that banks and credit unions do, in fact, earn interest income on the security deposits collected when a customer opens a secured credit card. These deposits, held as collateral, can become a significant source of income for financial institutions.
“Banks can earn interest income off of accumulated security deposit balances,” she notes. “With time and good payment behavior, these credit card holders may convert to an unsecured card and the security deposit is returned. However, prior to that, these deposits can generate significant interest income for the issuing bank.”
She also addressed a common consumer question: why secured credit cards don’t typically pay interest on security deposits. According to Dr. Dutra, it comes down to business models and profit margins.
“As competition in the banking and money transfer industries continues to increase, we see fees decrease, and profit margins become thinner. Banks develop new products and services to counter this trend,” she said. “Earning interest off of security deposit balances becomes another source of income and may explain why more card issuers do not pay interest on those deposits.”
Finally, Dr. Dutra unpacked how secured credit cards with no annual fee can still be profitable for issuers.
“It is very common for banks to charge secured credit card holders numerous fees such as annual, late payment, and transaction processing fees,” she explained. “All of these serve as revenue generators for the card issuer.”
Dr. Dutra’s feature on WalletHub reflects not only her financial expertise but also Morehouse’s growing presence in national conversations on banking, finance, and consumer education.
Read the full article and expert panel here.
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Business and Economics