Secured vs. Unsecured Credit Cards

Many people don't understand the difference between a secured and unsecured credit card, after all, they both look the same.

A deposit made to the issuers bank guarantees a secured credit card. This means that the person whose name the credit card has been issued in has deposited an amount of money into a low-interest saving account or CD for $300 to $5000 in order to secure the credit card. A line of credit will then be issued for deposit.

An unsecured credit card provides you with a line of credit of how much you are permitted to charge. Each month you must either pay off the balance or you may be permitted to carry over a certain amount to the next month. However, you will accrue a certain amount of interest.

Deciding which type of credit card is right for you will depend on your budget and spending habits as well as your credit score. Individuals who have a low credit rating generally have a better chance of acquiring a secured credit card more times than an unsecured credit card.

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