Most common credit cards are known as unsecured credit cards, meaning they don’t require a deposit to fund the card. Secured credit cards, on the other hand, are typically funded with a security deposit that is refillable by the cardholder. Much like a gift card or debit card, the consumer can only spend what they have. Unsecured credit cards usually offer lower interest rates as well as credit checks and credit approval, as well as a set credit limit.
Here are a few other important points to understand about unsecured credit cards:
* Consumers with decent credit or good credit typically benefit most from the unsecured cards due to the lower interest rates.
* Consumers with poor credit (but not terrible credit) may still be able to get approved for an unsecured card, but it may offer a very small line of credit. Secured credit cards are often the better choice for consumers with bad credit.
* To qualify for an unsecured credit card, the issuing bank considers the applicant’s credit history, potential earnings, and financial situation.
Each consumer’s individual financial behavior and history determines whether an unsecured credit card or a secured credit card would be the better option. Generally speaking, consumers with a bad credit score have difficulty getting approved for credit cards. If this is the case, a secured card can be a good choice. For consumers with strong or at least decent credit scores, the unsecured card can be more beneficial due to the lower rates. Consider your financial situation and choose the credit card type that best meets your needs.