Secured Credit Cards vs Unsecured Credit Cards

August 16, 2024 By: Stephanie H. - CreditMonarch Online Writer0 comments

Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities

Credit cards have the ability to be secured or unsecured. If you want to establish credit history and build your reputation as a borrower, a secured card may be a viable option with responsible use. If you already have good credit and don’t want to pay a security deposit, an unsecured credit card might be the better option.

A secured credit card requires the applicant to make a security deposit before they’re able to use the credit card. The purpose of this cash deposit is to provide collateral. In the event that the cardholder fails to pay their balance, the card issuer has the option to keep it. If the cardholder demonstrates responsible credit usage by making timely payments and otherwise abiding by the cardholder agreement, it can help them build a positive credit history and improve their credit. For those who lack credit history and want to start building their credit, obtaining a secured credit card may be a smart and strategic option.

An unsecured card is not required to have a security deposit, unlike a secured credit card. For this reason, credit card issuers may require better credit to approve unsecured credit card applications. Unsecured cards may offer additional benefits, including the possibility of earning rewards like cash back or miles. So you might be asking yourself what is the difference between secured and unsecured credit cards?

The main difference is that secured credit cards require a cash deposit. Otherwise, secured and unsecured credit cards work in similar ways. For both types of cards, the card issuer establishes a credit limit and the cardholder has a minimum payment due date each month and must abide by the other cardholder agreement terms. The applicant usually selects an amount for the security deposit, but the issuer may require that amount to meet minimum requirements or be within a specific range. The selected amount typically determines the credit limit.

If you’re looking to build or rebuild your credit score, a secured credit card can be a great tool to help you achieve that while also offering some of the same benefits as an unsecured credit card. Applying for an unsecured card might be a good idea if your credit is strong enough to qualify. Unsecured credit cards more frequently come with other benefits, like opportunities to earn rewards such as cash back or miles. It’s important to take the card’s terms and conditions into account before applying for a secured or unsecured credit card and ensure it matches your spending habits and goals.

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• Secured Card
• unsecured card