Deposit Type Credit Cards in Japan

 The major international credit card brands (JCB, American Express, Visa, and Mastercard) are available in numerous types in Japan:

• Traditional post paid credit cards
• Prepaid cards that must be charged before using
• Debit cards that link to an existing bank account
• Deposit based (Secured) credit cards

Traditional post paid credit cards can help you build a credit history, but... in general they require a credit history.  One way to get such a card is to have credit history from other loans, etc., or to start with a store card before moving to a card with Visa, etc.  Some companies will take a risk by offering you a card with a small limit, and then slowly increasing it over time as you show an ability and willingness to pay on time every month.  

This is so because the card companies are taking a risk by loaning you the money you use for purchases every month.  If you are a foreignor, especially one with no credit history, banks may be reluctant to take such a risk.  Likewise, even some Japanese people will be deemed a credit risk, especially those with a history of missing payments, as well as those in debt reorganization or bankruptcy, or those who already have a high level of debt compared with their level of income.  

Prepaid cards and debit cards are a solution to this issue, but they don't help you to build credit since there is no loan taking place.  

This is where deposit based cards come in.  

With a deposit based card, you must sent a deposit to the card company once your application has been approved.  This deposit then becomes your credit limit, which the company can then use to pay off your bill in the worst case.  Because of this, the credit card company is taking on very little risk and will approve applications from most people.  The major exceptions would be if you have been flagged for malicious activity, money laundering, or outright fraud.  

However, the deposit will normally not be used unless you don't pay your monthly bill.  Typically the monthly bill will be automatically deducted from your bank account, so as long as there are funds in your account, the money you spend each month will be deducted in the following month or so, and your credit limit will be replentished.  Only in the case that a direct debit fails (for example if you close your bank account or there are insufficient funds) would the credit card company actually use your deposit.  

This is in contrast to prepaid cards, where you deposit money and then spend that money directly.  With a deposit style card, you pay the deposit, and then when you use the card that is a separate loan balance as with a normal credit card.  After the monthly billing period is over, the company will calculate your balance due and send an invoice or initiate direct debit for the that amount - without touching your deposit.  

Once the payment has been received, your credit limit will be restores, and you can make more purchases up to the limit again.  So, although you have given them a deposit, the spending does constitute a loan, and so using this style of card does build a credit history.  

Some things to note:

1. Yearly card member fees are typically higher than the fees for a "normal" credit card

2. The yearly fees typically increase with higher deposit amounts/credit limits

3. Some cards do allow you to apply for an "ETC Card", which can be used to pay tolls automatically on the highway.

4. Some cards offer special services such as travel insurance, etc., in the same way that many normal credit cards do.  

5. If you ever decide to cancel your account, then you will receive your deposit back, minus any unpaid balance due.