If you are in search of a new credit card and have a bad credit then the only option for you is the secured card. These cards require a security deposit and have a minimal credit limit. While on the other hand if you have good to excellent credit score you can opt for unsecured credit cards. Lets further dive into the comparison of secured vs unsecured credit cards.
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Secured vs Unsecured credit cards – Key Takeaways
- A secured card is a type of credit card that requires a cash deposit as collateral. The amount of the deposit is primarily dependent on the credit limit you will receive.
- Unsecured cards do not require a security deposit and you become eligible for the card based on your credit history, income, and current financial situation. They tend to have lower annual fees and interest charges
- Secured cards are specifically for individuals who have poor to no credit history , whereas unsecured cards are primarily for people with fair to excellent credit history.
What is a secured credit card?
A secured credit card is a type of card that requires you to post a security deposit. Whenever you make a purchase through the card, the deposit will serve as collateral. So if you fail to pay for big purchases or debt, then the lender can use the deposit to reimburse itself.
The amount of the deposit is primarily dependent on the size of your credit limit. For instance, $1,000 security deposit will provide a credit limit of amount $1,000. Various credit card issuers can easily allow you to increase the credit limit by adding funds to your security deposit.
A secured card is a viable option for all consumers with bad or limited credit to avail of the credit card. In the case of limited credit, making a comparison between secured vs unsecured credit cards is useless. As secured cards have lenient terms and conditions and the chances of approval are greater. Secured cards works the same way as traditional credit card , you can easily make your monthly payments and reports the payment history to all the major credit bureaus
Examples of Secured Credit Cards
There are multiple options in the list of secured cards that are offered by various banks and unions. Here are the top 2 picks for the secured card
Capital one Platinum Secured Card
Capital One Platinum Secured Card offers a minimum credit line of $200 for which you have to make a security deposit of $49 or $99 to avail this credit limit. It is important to note that the security deposit are fully refundable. By making timely payments ou can get back your security deposit and further upgrade to the standard unsecured Platinum card. With this card you will be automatically evaluated for the credit line in the next six months.
Being one of the top-class secured credit cards it reports your payment to all three credit. Furthermore, you can easily monitor your credit through CreditWise from Capital One. The perks of the card do not stop here as it comes with no foreign transaction fee and $0 fraud liability for the ultimate protection of users. Furthermore, at your end, you can set security alerts to monitor in detail the potential suspicious transactions.
Secured Chime Credit Builder Visa® Credit Card
Secured Chime Credit Builder Visa® Credit Card is a distinct security deposit card. Rather than putting a particular security deposit. Rather than putting a certain amount as collateral, the credit card limit is established by the amount you transfer from the linked Chime Checking account.
Therefore, for this security deposit credit card, you must have a Chime Checking account to tick mark the eligibility criteria. The checking account must have a deposit of at least $200 per month to qualify for the secured card. Moreover, you can move any amount of cash from a checking account to the credit card to establish a particular limit.
The good aspect is that Chime does not run a credit check therefore the card is available to a large user base. Furthermore, there is no annual fee and interest charges on this card. Chime reports the payment history to all three credible credit bureaus. As there is no prescribed credit limit, so credit utilization ratio won’t impact the credit history.
What is Unsecured credit cards?
When the credit card is unsecured that means that you don’t need to put anything in collateral. The unsecured credit cards are also referred simply as credit cards. They comes with better perks and rewards to facilitate a large user base.
To qualify for these type of credit cards you need to have good to excellent credit score . If you currently have a poor credit score and want to garb the unsecured card , we suggest you to work on improving the credit score otherwise your application may got rejected.
Examples of Unsecured credit cards
Capital One QuicksilverOne Cash Rewards Credit Card
This card is primarily designed for the consumers that have the credit ranging from fair to excellent. With this card you gain 1.5% unlimited cash back on groceries , gas stations and other purchases. And if you book rental cars and hotels through CapitalOne you can earn unlimited 5% cash back . The rewards offered by these cards are of greater value . So when one makes a comparison of secured vs unsecured credit cards, unsecured cards are the winner in terms of rewards.
The rewards of this card can be redeemed through statement credit or by checked mailed for you. If you make timely payments through this card , you can increase credit limit in a span of six months.
Secured vs Unsecured Credit Cards – Key Differences
| Feature | Secured Credit Card | Unsecured Credit Card |
| Security deposit | Required | Not required |
| Credit limit | Typically, equal to the security deposit | May be higher or lower than the security deposit |
| Interest rates and fees | May be higher than unsecured credit cards | May be lower than secured credit cards |
| Rewards potential | May offer rewards and perks, but may not be as widespread as unsecured credit cards | May offer a wider range of rewards and perks than secured credit cards |
| Eligibility | Easier to qualify for, even with bad or limited credit | More difficult to qualify for, typically requires good or excellent credit |
| Credit building potential | Can be a good way to build or rebuild credit | Can also be a good way to build credit, but may not be as effective as a secured credit card |
Credit Application of Secured vs Unsecured credit cards
Applying for a secured card is similar to applying for the unsecured credit card. You will start off by making the best unsecured cards that offer greater value in terms of rewards, airlines and cashback . Depending upon your credit score, the preference of rewards and you are spending habits you can easily make a choice of the top unsecured credit cards.
Just in a similar way you compare the secured cards that offers the perks you really want, confirm the application qualifying criteria and then start the application.
Choosing between Secured vs Unsecured credit cards
Everyone has a unique financial situation so it’s difficult to conclude a single card that works well in all use cases. The credit card that works well for your friend might not suit you . But the crucial thing while you make a comparison between secured vs unsecured credit cards is the consideration to your financial needs and goals. It is recommended to consider credit cards that offer preapproval so you will know your eligibility before the hard inquiry.
Best Credit cards that offer Preappoval
Are you looking for a new credit card that won’t start with the hard inquiry ? If yes look for the detailed list of the credit cards that gives you the good chance of knowing the eligibility of the cards.
Frequently Asked Question
What’s the total credit limit of unsecured credit card ?
As unsecured credit cards are not dependent on the security deposit . So each card offers a specific credit limit. If you have a good to excellent credit score than you can easily get a higher credit limit.
Which is better option in Secured vs Unsecured credit cards?
When making a comparison between secured vs unsecured credit cards, Unsecured credit cards have lower interest charges and higher credit limits, so they are considered a viable option . If you have poor to average credit then you can apply for secured card that is easy to qualify for.
