Whether you’re looking for a credit card to rebuild credit or you might be interested in credit card rewards and promotions, a secured or unsecured credit card both have its own advantages and disadvantages.
If you have little to no credit or bad credit, a secured credit card, when used properly, can help you rebuild your credit history. Secured cards are similar in many ways to traditional credit cards. While unsecured credit cards, on other hand, are often designed to attract consumers with a wide range of rewards.
Continue reading our post to compare the difference between secured and unsecured credit cards and determine which type is best for you.
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Table of Contents
How Secured Credit Cards Work
What is a secured credit card? A secured card is made for people who are wanting to build or rebuild their credit. This can include somebody who has bad credit or no credit history at all. If you’re considering a secured card, you’ll need to complete the application process, provide your financial and personal information along with your bank account and routing number.
To get a secured credit card, you’ll need to provide a refundable security deposit that acts as a collateral on the account. Lenders reduce their risk since they can use your secured deposit to cover your balance just in case you can’t make payments.
Your lender will return your deposit if you cancel the card, provided that your account is in good standing. If you’re interested on signing up for secured credit cards, you can check out our following reviews on:
How Unsecured Credit Cards Work
With an unsecured credit card, you don’t need to provide a security deposit, so whether you have a good or excellent credit you are able to be approved for one.
Not to mention, since there is no collateral required, the terms of the debt are based upon the borrower’s credit rating, ability to pay, application information and other factors. But keep in mind since that the debit is unsecured, this type of debt is typically slightly riskier for lenders to issue.
Most unsecured credit cards offer rewards programs that include cash back on purchases or airline miles and points.
So as long as you make your payments on time, an unsecured card can help you build your credit since issuers reports the balances and payments on the cards to the credit bureaus.
How to Choose between Secured and Unsecured Cards
If you’re considering signing up for a card, consider the factors to see which card is the best for you:
- Even those with bad credit can qualify: For those who need a way to get back on their feet, secured cards have few approval qualifications.
- Can help you build a good credit history: If you are new to credit cards, secured cards offer a deposit-protected and structured environment to build upon.
- Deposit is refundable: While paying a deposit to get a credit card isn’t convenient, as long as you keep your account in good standing and pay off your balances, you’ll get your initial deposit back.
- Lower interest rates and fewer fees: Those with an established credit history and good-to-excellent credit scores can access cards that cost less over time than secured cards.
- Access to rewards programs: Large purchases and everyday expenses can actually earn you money back if rewards cards are used strategically.
- More cards to choose from: There are many more options and types of unsecured cards than secured cards. Whether you are looking for a card with low interest, rewards, balance transfer deals, or excellent travel benefits, you’ll have options.
- Higher credit limits: With better credit comes a higher credit limit. This can help you fund large purchases without maxing out the card or hurting your utilization ratio.
- Approval qualifications vary: Depending on the card, credit score requirements will vary. Even if you have been a responsible cardholder, you might not qualify for the very best rewards card. You’ll need to do some research to find a card that fits your needs and your credit score.
|Credit History||Credit Score||Which Card to Choose|
|Established||Good||Secured or unsecured|
If you have bad credit, you should look for cards that offer the lowest processing fees, the lowest interest rates, and a credit limit that will work for you.
In summary, secured cards are tools designed to help people with little or bad credit, but they seldom offer rewards. While Unsecured cards are great for people with a fair credit history because they can offer rewards whenever you make qualifying purchases.
Below are a few secured/unsecured credit card options:
- Capital One Secured Mastercard
- First Progress Mastercard Secured Credit Cards
- Fit Mastercard
- Reflex Mastercard
- Surge Mastercard
- First Access Visa Credit Card
- First Digital NextGen Mastercard®
- Total Visa® Unsecured Credit Card
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