The Difference Between Secured And Unsecured Credit Cards

Building or rebuilding credit can take a long time if you can qualify for credit approval. If you can’t then it might seem like you’re out of luck. There are two types of credit cards you can get today; secured credit cards, and unsecured credit cards. Let’s take a closer look at the difference between secured and unsecured credit cards; then you can make a better decision about which one is right for you.

Secured Credit Cards
• Secure credit cards require you to secure the credit with a deposit from your own checking or savings account
• Most secured credit cards are offered to individuals with no credit, or very bad credit.
• Most banks will only offer secured credit cards to individuals who are members of their bank.
• Secured credit cards can help boost your credit standing. Credit bureaus really have no way of knowing that the card you are making payments on is a secured credit card. You need to make sure however that you choose a card that reports to all of the major credit bureaus.
• A secured credit card is similar to a traditional credit card in that you will still have to make payments monthly; the best option obviously is to keep the balance at zero by paying it off every month. This will increase your credit score and make the healing process much less painful.
• Secured credit cards usually will not have an annual APR.
• Secured credit cards can often be less expensive in total costs than an unsecured credit card.
• Secured credit cards require a minimum amount of money put onto the card; usually somewhere around $200-$300. Many of them also have a maximum amount you can put on the card. They have gone as high as $15,000. Whatever limit you set for yourself, make sure it is enough to make a significant difference in your credit standing. A $200 limit will not usually be enough to help your credit scores, but $1000 or higher is usually enough to get the attention of the credit bureaus.
• With a secured credit card the creditor issues you the secured credit card by using the amount you have deposited as security

Unsecured Credit Cards
• An unsecured credit card is one that is issued by a bank or credit card company. Most of the credit cards issued today are unsecured
• An unsecured credit card is usually issued to persons that have a good credit history or have demonstrated the ability to repay the accrued charges on time.
• With an unsecured credit card the credit limit is determine on an individual basis. It usually depends on how good your credit history is. They can often be raised if you prove make payments on time and can also be lowered if you don’t.
• An unsecured credit card is similar to a pre-approved loan with higher interest rates.
• A benefit to having an unsecured credit card is that you have instant access to as much cash as you need. If an emergency comes up the money is there; you don’t have to fret about where you’re going to get the money.
• A disadvantage to having an unsecured credit card is that you have instant access to as much money as you need and will often times overspend. This can become problematic and you can begin to accumulate more debt than you can handle.
• An unsecured credit card also gives its holder the ability to make reservations online, or car rentals or purchase airline tickets. Something that some secured credit cards may or may not do.

In some ways the difference between secured and unsecured credit cards are small; in others they differ greatly. It is personal preference on which card works best for your needs. If you tend to overspend then going with a secured credit card might be a better route. If you are disciplined in not overspending and paying off your balance every month then go with an unsecured credit card.