Credit cards are issued by financial associations such as banks, stores, or service providers. Only customers that meet up with certain criteria are entitled to apply for them, they are subjected 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. Monthly payment includes an interest payment, and additional charges are also payable on an annual basis.
The biggest problem with unsecured credit cards is their excessive fees. When high fees are paid for unsecured credit cards, that money is gone forever. Therefore, even though you’re not explicitly putting down a deposit, you’re still paying out of your pocket. When you consider all the fees you’d pay for an unsecured card versus a secured one, you will find that you pay more for the unsecured. Some secured credit cards have low fees with kind treatment of customers.
What is a Secured Credit Card?
A 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.
What is an Unsecured Credit Card?
An unsecured credit card is like any other credit card, with a difference that you don’t have to provide any collateral security or deposits as you would in the case of a secured credit card. But, remember, nothing in life comes free. If you want to enjoy credit without providing any security, then you must pay a higher interest rate on the credit amount.
Benefits of secured credit cards
- A secured credit card can help you establish or re-establish your credit.
Since payments are included in your credit report, paying on time and managing your balance will help improve your credit score. After building your credit score, you may be able to qualify for a regular credit card.
- You can earn interest on your deposit.
Some secured credit cards place your deposit in an interest-bearing savings account. Depending on the interest rate and the amount of time your deposit remains in the account, you might be able to earn a few bucks.
Benefits of Unsecured Credit
- No Collateral Needed
Applying for unsecured credit meant that you do not have to make a personal promise to get the money you needed. You don’t need to mortgage your house or put up your Rolex. There is absolutely no deposit required and you didn’t even need a cosigner. With an average credit score of 689 and a relatively short credit history you will still able to attain unsecured lines of credit before it is too late.
- Flexibility in payment
They also provide you with a little flexibility in terms of how and when you make payments. There are no more fixed month-to-month statements; you actually have three options every time you pay: you can send in the full amount due, pay the minimum requirement, or go over the minimum to an amount that is within your budget.
In conclusion, the main difference between secured and unsecured credit card is that, secured credit card requires collateral while an unsecured credit card does not. Below are some company that offers credit card services.
