What's the Difference Between Secured Credit Card vs Unsecured?

Let’s learn about these non-traditional credit card options and how secured credit cards vs. unsecured compare. 

What is a Secured Credit Card?

This cash security deposit helps protect the credit card company from recognizing a loss by issuing you a credit card and then failing to receive payments.

How Does a Secured Credit Card Work?

Secured credit cards work by having the cardholder front a required deposit to open an account, reducing the risk to the credit card issuer of you defaulting or missing a payment. 

What is an Unsecured Credit Card?

“Unsecured” means that your debt incurred on the unsecured card doesn’t come backed by collateral—a deposit in the case of secured cards—and relies on a borrower’s credit score.

How do Unsecured Credit Cards Work?

They work by providing you with a revolving line of credit, meaning you can spend up to an approved amount without making a payment within a monthly billing cycle.

Secured Credit Card vs. Unsecured Credit Card

Upfront Deposit

A secured credit card operates under a collateral-based system, meaning you make an upfront security deposit, de-risking your account for credit card issuers.  An unsecured card doesn’t have this requirement, instead relying on your credit scores provided by the major credit bureaus to identify your creditworthiness.

Rewards Program

Often, a secured credit card doesn’t come with rewards programs. Instead, they focus primarily on building or rebuilding credit. Unsecured cards tend to offer rewards programs to entice consumers to open an account.

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