Difference Between Secured and Unsecured Credit Card

Posted on June 8, 2017 by Dili

Credit cards are issued by financial institutions such as banks, stores, or service providers and customers that fulfill pre-determined criteria are entitled to apply for the same, subject to a credit limit. Credit card balances are rolling, where a portion of the due amount has to be paid every month until the full amount is paid. This monthly payment includes an interest payment, and additional charges are also payable on an annual basis. The key difference between secured and unsecured credit card is that a secured credit card is a card that is safeguarded against a form of collateral whereas an unsecured credit card is a card that is not protected against a form of collateral.

Secured credit card is a card that is safeguarded against a form of collateral (an asset pledged against debt), usually a security deposit. Credit limits of secured credit cards are often set at the maximum or lesser value of the security deposit. As a result, the credit limit on a secured credit card depends on the security deposit, and the credit limit can be extended by increasing the value of the security deposit. It is easy for a customer to obtain a secured credit card than an unsecured one since it demonstrates less risk and is credible; if the customer defaults, the issuer can recover the payment through the security deposit.

Small credit limits are offered by secured credit cards; the customers are often protected from overspending and getting into a poor payment history. Thus, secured credit cards are an attractive option for customers who find it difficult to maintain credit levels at a desirable level. However, limited credit limits are considered a hindrance by many customers. Furthermore, if the payments are constantly made on time, the issuer may reward the customer by increasing the credit limit without an increase in the security deposit. Thus, making regular payments and using the credit card in a responsible manner is vital for a secured credit card.

Unsecured credit card with no deposit

An unsecured credit card is a card that is not protected against a form of collateral and is the most widely used type of credit card. Credit limits of unsecured credit cards are usually higher than secured credit; however, they are subjected to higher interest rates due to the inherent risk. Unsecured credit cards are issued to customers who have a sound credit history and a steady stream of income. Even though a higher credit limit can be obtained, this may also lead to overspending by some customers, which may make it difficult to make monthly payments on a timely basis. Credit card debt is a massive issue to some customers since they are unable to pay off such debts. Accordingly, an unsecured credit card may not be an option for all types of customers.

In case that the customer’s default, which is not rare in many cases, the issuers have to implement legal actions to collect unpaid debts. This is an unfavorable situation that results in a waste of resources for the card issuer. Thus, they should be very careful, and the granting of credit cards and credit limits should be done with proper due diligence.

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Figure 02: Defaulting rates for credit cards have increased drastically within the last years.

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no worry! actually you can have Unsecured credit cards for bad credit and no deposit required! though it will not be easy to find the good one! previously I already listed the best unsecured credit cards in here(List of unsecured credit cards for people with bad credit) check the list I am sure you can find that most suitable for you! though I must tell you, most of unsecured credit cards that accept bad credit most of them will charge you with high APR, High annual fee and etc!

and to be honest, I think its perfectly normal! and If I were you, I will prefer to build my score first!, rather than force my self to get unsecured cards with bad credit! and to be honest there is no easy way to find best offer beside with Good credit! and previously I already cover about how to build credit score with in short time! take your time to read (Ways to build credit score! Fast and Reasonable!)

If you still insist to get unsecured credit card, meanwhile you have bad credit! that’s okay! but if you want to build credit score and start over! read the page that I give to you! and if you choose to build your score, my suggestion is try to find Credit union! because most of them have no annual fee, decent APR, and if you already have good credit! then ask them with unsecured credit cards! ask better APR, such 7%-8%! and also ask to increase your credit card limit! because if you have decent APR, with High credit limits and have excellent score! the chances is you will get almost same or even better offer from other company!because the logic in credit cards industry is always like this “better or move on” !

It mean, if credit cards company give you an offer, you just need to say the passwords! I already have Good Cards, 8% APR, and Credit limit about 50k! if your company can give better offer! then we talk! if not don’t call me again! Imagine if 5-10 company call you and agree with your term! yep! your credit limit can reach 1 Million Dollar! $$$ but if you apply credit cards, with bad credit! the chances is, they will play hard to get! e.g High APR(36%), Low limits, $500, and the worst is! $125 Annual fee!

Guys, $500 credit limit with $125 Annual fee it’s not credit cards! it’s Fckng! Rip Off!

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/ The Best Bad Credit Cards with No Deposit – You Can Avoid Secured Cards!

If your credit rating is in the low 600’s or worse, then you’ll be stuck looking for a bad credit card and most of them are secured. This means you’ll likely have to put up collateral towards your credit limit. While this deposit is usually refunded at some point, it’s obviously preferred to avoid this cost altogether.

So if you do have a low FICO score, there are some cards you can apply for that might qualify you without a deposit. There’s a possibility they will ask for a deposit still, but each of these cards have been approved for borrowers with weak credit ratings before.

While the options are limited, the team at Elite Personal Finance has brought together a short list of quality business credit cards that don’t require deposits. We recommend you consider Prepaid Business Cards as an alternative though; if you have bad credit, a prepaid card has no interest typically so you don’t have to worry about facing a potential APR rate of 20% or higher.

The best cards that don’t require a deposit or collateral funds at the moment include:

This card will pre-qualify you, which means you can get guaranteed a certain credit limit without making a hard inquiry to your credit report.

Gas and grocery shopping gets you 1% cashback with this unsecured. No deposit is required since it’s 100% unsecured. After you pay on time for a little bit you might be given the chance to take on a larger credit limit.

ItВ gives you the ability to track your FICO score whenever you want to see it. You can also check out your credit report whenever you wish.

There’s an APR rate of between 15.65% and 24.15%. Your annual fee will be $75 for the first year and it will come out of the available balance when it first opens. The annual fee could be as much as $99 after the first year.

There’s a $95 processing fee you have to pay once you get approved. There’s also a 36% APR rate. This is super high, but even those with destroyed credit stand a chance to qualify.

Your annual fee can run from $75 to $125 in the introductory year and $45 to $49 in the following years.

Unfortunately, both the First PREMIER Bank and the FIRST PREMIER Bank Gold do not currently allow applicants from New York or Wisconsin.

On the plus side, after a bit of time you can get a credit limit increase on your First PREMIER Bank credit card(s). This will help you grow your total available credit and lower your utilization rate.

This card also offers pre-qualification, so you can avoid the hard inquiry defect on your credit report.

It has a fixed rate APR of 23.9% and there’s only a $35 annual fee. You could potentially get approved for this card with as low as a 630 FICO score.

Aside from the high APR, there’s also a 1% foreign transaction fee which makes it a non-ideal to use while traveling abroad.

There are no major perks with this card. You don’t get rewards back, but at least the annual fee is low. The best thing about the Milestone Gold MasterCard is the fact that even those with poor credit can get accepted for it.

Another cool feature is the ability to custom select the physical card’s design.

Pre-qualifications are also available for the Indigo Platinum MasterCard. Almost everyone, regardless of creditworthiness, can get accepted.

It covers your warranty for longer and offers a price protection policy. It even gives you identity restoration services for free if they’re ever needed.

You’re fixed to a $300 credit limit and the card features a 23.9% APR rate. When you apply, you can get pre-qualified; there’s no need to do a hard inquiry and drag your credit score down.

The interesting thing is how annual fees are charged. It goes based on your creditworthiness, with $0, $59 and $75 being the possible annual fees. If you get a $75 fee it will become $99 after your introductory year. This annual rate is excessive, so you will want to close itВ after it helps you get your FICO score strong enough to qualify for a much better unsecured card.

Another great feature with the Indigo Platinum MasterCard is the ability to choose the design of your card.

You can get a better APR rate on a secured, but they won’t hold as much strength on your credit report. They are marked as ‘secured’ cards specifically, while an unsecured card that doesn’t require a deposit will be marked as ‘unsecured’ instead.

So taking on a higher interest rate might be worth it for you.

Your FICO score will vary depending on the amount of debt you have compared to the amount you are able to borrow. The average age of your credit accounts can also influence your credit rating in either direction. They will report your on-time payments so after a while you will notice a considerable credit rating boost.

The last answer gives you some insight on why you don’t want to bother signing up for a secured credit card. However, if you aren’t happy with any of the no-deposit unsecured cards you should consider the Discover it Secured Card. This can be upgraded into an unsecured card and it gives up to 2% in cashback rewards, making it the best cashback secured card around.

Are prepaid business credit cards a good alternative?

We mentioned earlier that you might want to consider prepaid business cards instead of no-deposit unsecured. The biggest benefit of prepaid cards is the fact that you avoid paying interest altogether. If you carry a balance every month instead of paying off your purchases quickly, both secured and unsecured will easily cost a lot. While prepaid cards have no reward incentives, they are set up better than most credit cards for business purposes.

Look at the Bento MasterCard and the PEX VISA prepaid cards. They both let you specifically control how much money is loaded, how often a card funds itself, where each cardholder can spend funds (ex. gas stations ‘YES’, restaurants ‘NO’), and much more. The administrator of the employee cards can even suspend it(ex. if an employee quits) whenever necessary. All this can be done remotely, and you can even use an app to control all your employee cards from your cell phone if you go with the PEX VISA card specifically.

Many like the idea of a prepaid card because they work the same as a credit card, yet they have no APR rate to stress over. Another big selling point is the fact that the business owner’s personal credit doesn’t have to be drug through the mud in order to have a business credit line. It’s only an unappealing alternative if you need extra financing and you don’t have collateral funds to put up. But for those who are just against the idea of a secured card, it’s worth weighing out the benefits and downfalls of a prepaid business credit card.