Do you want to know the differences between Secured and Unsecured credit cards? From Responsible Economy, we show you in detail what the main differences are and explain how each one works. Let’s get started!
Secured and unsecured credit cards are two types of credit cards that differ in the way they are issued. Secured credit cards require a security deposit, which is used as collateral for the card issuer in case the cardholder does not pay their debts. Unsecured credit cards, on the other hand, do not require a security deposit.
Secured credit cards are a good option for people who are starting to build their credit history or who have bad credit. Security deposits for secured credit cards are usually between $200 and $1,000, and the credit card limit is usually equal to the deposit amount.
Unsecured credit cards are a good option for people who have a good credit history. They do not require a security deposit, so you can get a credit card even if you do not have a credit history. However, interest rates and fees for unsecured credit cards are usually higher than those for secured credit cards.
Summary table with the differences
Here is a summary of the main differences between secured and unsecured credit cards:
| Feature | Secured Credit Card | Unsecured Credit Card |
|---|---|---|
| Security deposit required | Yes | No |
| Credit limit | Based on the security deposit | Based on the applicant’s credit history |
| Interest rates | Typically higher than unsecured cards | Typically lower than secured cards |
| Fees | May have annual fees or late payment fees | May have annual fees or late payment fees |
| Rewards | May offer rewards, such as cash back or travel points | May offer more rewards than secured cards |
Conclusion
Ultimately, the best type of credit card for you depends on your individual needs and circumstances. If you are just starting to build your credit history, a secured credit card may be a good option. If you have good credit history, an unsecured credit card may be a better choice.
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Updated the day 1 September, 2023 by Alfredo Barandiarán
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