Yes, money is fungible which makes it seems like a nonsensical dance ("can I borrow $10? here's $20 collateral.") but I promise you, it's exactly that. As silly

Yes, money is fungible which makes it seems like a nonsensical dance ("can I borrow $10? here's $20 collateral.") but I promise you, it's exactly that. As silly as it sounds you really are borrowing money with money as collateral. The money you borrow even comes with an interest rate and you get charged interest if you don't pay the balance in full (only minimum)! If you weren't actually borrowing money then it wouldn't effect your credit score, full stop. For example, read the terms for Discover's secured card: https://www.discovercard.com/application/securedApplicantTerms?srcCde=KXNV https://www.discovercard.com/application/securedApplicantTer... >If you are in default under the Cardmember Agreement or the Account is closed for any reason, you authorize us at any time(s) to withdraw all or any portion of the Funds from the Security Deposit Account and apply them to reduce your Obligations. Any such application of Funds will not constitute any part of the Minimum Payment Due under the Cardmember Agreement. You will continue to be responsible for making payments as required under the Cardmember Agreement and for repaying any outstanding Obligations.