Difference Between Secured Credit Card and Unsecured Credit Card (With Table)

Credit Cards are of two categories – Secured Credit Card and Unsecured Credit Card. Before deciding which one is the suitable option for us, we need to focus on our needs or purpose. They are meant for different people and come with different offers, benefits, and uses. It depends on our credit history and what kind of security we are claiming. Moreover, their rate of interest varies. That is an important point to keep in mind. Hence it is very important to know their terms and conditions. This shall help us choose the option that is right for us.

Secured Credit Card vs Unsecured Credit Card

The main difference between Secured Credit Card and Unsecured Credit Card is the security conditions. Secured Credit requires a mandatory deposit which guarantees it to be secured. It also comes with being labeled “secured.” Whereas, the Unsecured Credit Card does not possess any such criteria for security. Also, the cards are not clearly labeled as “unsecured.” They do depend on the presence or absence of collaterals.

A secured Credit Card is the easiest option for a cardholder. It comes with a lot of accessible facilities. First of all, it is very affordable and is the safest option to use with security. It is also used to repair our credit score and also to increase t. A fixed deposit is however mandatory.

On the other hand, an Unsecured Credit Card requires a decent amount of credit score. The credit score is solely based on the customer’s performance. It also has a comparatively high rate of interest. It does not require any sort of fixed deposit. The cards might have an annual fee.

Comparison Table Between Secured Credit Card and Unsecured Credit Card

Parameters of DifferenceSecured Credit CardUnsecured Credit Card
CriteriaIt can qualify with low or no credit as well as deposits.It can qualify only with a decent FICO score along with credit history.
RewardIt comprises less number of rewards.It comprises a lot of rewards.
LabelIt is always mentioned as “secured.”It is not clearly mentioned as “unsecured.”
InterestIt has a high rate of interest.It has a low rate of interest.
CheckMost of the time it does not require a credit check.Here credit check is mandatory.

What is a Secured Credit Card?

In the case of Secured Credit Card, they are given in the presence of collateral. It means, it is given against a fixed deposit. They are very easy to avail and are indeed affordable.

To get a Secured Credit Card, we need the minimum amount for a fixed deposit. That is the main criteria to link it. It is a very good option for general customers. They are also referred to as credit cards against FD.

A number of features are reflected in the credit limit of a person. It depends on the eligibility of a cardholder. Banks do consider several fields such as the income of the customer as well as the credit score to calculate the credit limit. Hence, it comes with a lot of factors.

There is a facility to apply for credit cards online. This takes place while opting for a fixed deposit. One can avail of a Secured Credit Card when the criteria and minimum amount for the fixed deposit are fulfilled.

What is Unsecured Credit Card?

It is named Unsecured Credit Card since it does not come with any collateral. For this reason, as the name suggests, it comes with a lot of criteria.

First of all, the banks get to set the credit limit of the issued cards. The limit mainly depends upon the income of the cardholder. The credit limit keeps on varying. Depending on our performance, it can get raised accordingly.

It has a specially designed way of attracting customers by its offers and benefits. However, it is very important to maintain the norms. Paying off debts is one of them.

Moreover, avoiding the late fees also reflects a good impression of the Unsecured Credit Cardholder. The minimum requirements are always to be cleared off. The customers often enjoy various benefits and rewards.

Main Differences Between Secured Credit Card and Unsecured Credit Card

  1. One of the important points of difference between a Secured Credit Card and an Unsecured Credit Card is security. Secured Credit Card can qualify with low or no credit as well as deposits. Unsecured Credit Card can qualify only with a decent FICO score along with credit history.
  2. The rate of interest is also a vital point for credit cards. A secured Credit Card has a high rate of interest whereas Unsecured Credit Card has a low rate of interest.
  3. A secured Credit Card is always mentioned as “secured.” Unsecured Credit Card is not clearly mentioned as “unsecured.”
  4. Rewards are a point of attraction. Secured Credit comprises less number of rewards. Unsecured Credit Card comprises a lot of rewards.
  5. Most of the time Secured Credit Card does not require a credit check. On the other hand, a credit check is mandatory in the case of an Unsecured Credit Card.

Conclusion

Both of them are for specific customers with distinct features. However, being credit cards, they do have quite a few overlapping features. They are interlinked to each other. The cards offer guaranteed cashback and come with various other benefits. These can be availed by the customers during shopping or other activities.

A Credit Card score is a very essential point to keep in mind. The performance of a cardholder is reflected in the credit score. On the other hand, it determines the credit score. This is why it is advised to always clear the dues and debts every month. This helps in improving the credit card. The easiest way to avail of a Secured Credit Card is by a fixed deposit. The process is also affordable and mainly safe. The aim of credit cards is to build credits. However, the credit limit is solely based on the customer’s eligibility.

Reference

  1. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2862961
  2. https://academic.oup.com/rfs/article-abstract/31/3/1184/4563344
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