The Difference between Secured and Unsecured Credit Cards

Credit cards are part of our fiscal landscape and are a wallet necessity for many people. Today, credit cards come in two flavors: secured and unsecured. It’s important for anyone applying for a credit card to understand the differences between the two in order to figure out which one will be the best financial fit. When it comes to choosing between secured versus unsecured cards, there are five important things to consider.

Credit History

Your credit history plays a humongous role in the type of card you qualify for. Secured cards are generally best suited for individuals with no credit, very little credit or for those who have some bumps and bruises on their credit and who are looking to re-establish it. Unsecured cards, however, are usually best for individuals with good and established credit.

Security Deposit

Secured cards usually come with a required up front deposit of anywhere from $100 to $500, and that deposit is commensurate with your initial credit limit. The bank holds this money in the event that you fail to pay on the card as agreed. However, the money is usually released back to you after a pre-determined amount of months with a satisfactory payment history.

While unsecured cards typically do not require a security deposit, it isn’t uncommon for these cards to require an application fee or annual fee (if applicable) up front with your application. Make sure you read the fine print before signing on the dotted line.

Interest Rate

Since secured cards are granted to individuals who are considered higher credit risks, the interest rates for these cards are usually much higher when compared to an unsecured card. Shop around to find the best rate, regardless of the card for which you qualify.


Most credit card issuers have rewards programs that allow consumers to earn points, airline miles or gifts on every dollar they spend. Typically however, these programs are more common with unsecured cards than they are with secured cards.

Credit Limit Increases

Credit card issuers will usually increase your unsecured credit line on either a secured or unsecured card after several months of satisfactory payment history. However, the rules for credit limit increases vary from one credit card issuer to the next.

Whether a secured card or an unsecured card is right for your financial situation now, it is important to remember to use your credit responsibly. Pay off your balance on time each month and avoid costly interest payments or late fees, and do your best to stay away from racking up more credit card debt than you can handle, regardless of which kind of credit card is right for you.