What's The Difference Between Secured vs. Unsecured Credit Cards

Secured vs. Unsecured Credit Cards - What's The Difference?

Many consumers have a bit of confusion when it comes to distinguishing a secured credit card from an unsecured credit card. They both carry a brand logo from one of the major credit card companies and they both can be used anywhere that major credit cards are accepted. It is the behind the scene financial activity that determines the difference between a secured and an unsecured credit card.

A secured credit card is a guaranteed VISA or MasterCard that has been secured by a deposit to the issuer's bank. Generally, you must deposit an amount, ranging from $300 to $5000, in a low-interest saving account or CD to secure the credit card.

You then receive a credit line for up to 100 percent of your account balance. Each creditor has its own requirements for how much you can deposit for your credit line. The creditor issues you a credit card by using your deposit as security.

On the other hand, an unsecured credit cards offer just that -credit. When you make a purchase or withdraw cash (usually called a cash advance), funds are drawn from your "line of credit." You pay back the amount you borrowed or "charged" each month, or carry over to the next month (revolve) a certain amount that was borrowed and you are assessed an interest charge.

You are then responsible to pay the interest charge as well. Credit cards carry a brand logo (e.g., Visa, MasterCard, American Express, etc.) and are accepted by participating merchants. When you use your credit card, the transaction requires a signature.

More details about secured and unsecured credit cards can be found at www.easy-approval-credit-cards.com Determining what type of credit card is best for you will depend on your personal budgeting and spending habits as well as the status of your credit score. People with low credit scores usually have a better chance at obtaining a secured credit card over an unsecured credit card.

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Unsecured Credit Cards : What's the difference?

There are a lot of terms associated with the credit world. With such daunting vocabulary as variable APR or secured card, sometimes people can get confused about just what a feature of a credit card means.

First, we'll discuss what a secured credit card is. A secured card is a card that is guaranteed. When you apply for one of these cards, you guarantee a deposit of cash or otherwise collateral so the bank can be sure that you will pay them back. This is a must when establishing credit or trying to rebuild a shattered credit rating. So, on the opposite end, unsecured credit cards are cards that you get without any guarantee to the bank that you will pay them back. For this reason, unsecured cards are usually only offered to people who have a good credit standing.

To establish a good standing, most people begin with secured credit cards and work their way up to unsecured credit cards. Since the bank is placing so much trust in you, they have to see a good track record. For this reason, you should always try to keep your credit rating in tip-top condition. Pay bills on time, regularly use your card and immediately pay it off. If you maintain this month after month, your credit rating will begin to rise. You will be known as a trust worthy person who responsibly manages to pay there bills on tine.

Unsecured cards are normally the better cards with higher credit limits, and you won't need to put a deposit down of any kind. You simply get the card and are free to use the money limit set. If you start out with a secured card, make sure you pay your bills on time every month and before you know it, you will be legible to be accepted for a more powerful unsecured card.

These are a few things that you can do to get on the road to receiving unsecured credit cards! Best of luck!
About the Author

John Gibb manages http://www.credit-card-guides.net

An updated blog dedicated to educating people on credit cards.