What is the Difference Between Secured and Unsecured Credit Card?

The main difference between secured and unsecured credit cards lies in the security deposit requirement. Secured credit cards require a cash deposit as collateral, while unsecured credit cards do not. Here are some key differences between the two types of credit cards:

• Security Deposit: Secured credit cards require a security deposit, which is refundable when the account is closed with no balance or if the borrower graduates to an unsecured card after several on-time payments. Unsecured credit cards do not require a security deposit.
• Credit Score and Income Requirements: Unsecured credit cards typically require a higher credit score and more income to qualify than secured credit cards.
• Interest Rates and Fees: Secured credit cards often come with lower credit limits and higher interest rates than unsecured cards. Unsecured credit cards tend to have better perks, rewards, lower fees, and lower interest rates.
• Credit Building: Both secured and unsecured credit cards can be used to build credit, but secured credit cards are often marketed towards people looking to build or rebuild their credit.

Despite these differences, both secured and unsecured credit cards can be used to make purchases, and you'll receive a statement at the end of the billing cycle. Paying on time and in full each month helps you avoid interest and late fees, and responsible use of a credit card can help improve your credit score.

Comparative Table: Secured vs Unsecured Credit Card

The main difference between secured and unsecured credit cards lies in the requirement of a security deposit and the target audience. Here is a table comparing the key differences between secured and unsecured credit cards:

Secured credit cards are designed for people with limited credit, no credit, or those looking to rebuild their credit, as they require a security deposit. On the other hand, unsecured credit cards are geared towards consumers with fair to excellent credit and do not require collateral. Both types of cards can help build credit if used responsibly, but unsecured cards tend to offer better rewards and benefits.