Difference Between Secured vs Unsecured Credit Cards

Banks provide two types of credit cards. which are secured and unsecured credit cards. In this article, we will learn about secured vs unsecured credit cards. Because there are a lot of differences between both credit cards. These play different roles in our credit history. The eligibility criteria for obtaining both types of credit cards are also different. Everyone wants to get an unsecured credit card. Whereas getting an unsecured credit card is not easy for a new person if he does not have any credit history. Also, if we have a secured credit card in our credit history, it helps us in obtaining a good credit score.

If you don’t know much about either of the two types of credit cards then it doesn’t matter. We will learn in detail about both types of credit cards in this article.

Disclaimer: This blog is solely for educational purposes.

What is a secured credit card?

Secured credit cards and unsecured credit cards are exactly the same and generally work the same way. But for the secured credit card you have to give a minimum deposit to the bank. This deposit determines our credit card limit. Which is possible as per the rules of different banks. At the time of taking a secured credit card, the bank does not give much importance to our credit history. Therefore, even if a person does not have a credit history, he can get a secured credit card.

This is a credit card that is issued based on collateral. A valuable asset or property that can be used to get a personal loan or credit card account is referred to as collateral. If you fail to repay the debt you owe, the lender may repossess your collateral in order to regain their investment.

Mainly “secured credit card” is used by people whose credit score is poor and who want to improve it. Or then there is the person who has no credit history.

For example, You can visit ICICI instant Credit Card with Fixed Deposit (FD).

What is an unsecured credit card?

To get an unsecured credit card, we do not have to give any collateral or fixed deposit to the banks. Thus, the risk of the issuing banks increases when they give an unsecured credit card to any person. That is why banks do not give unsecured cards to anyone quickly. Banks check various factors such as a person’s credit history and income sources. Credit cards are given based on information received.

What is the difference between a secured and unsecured credit cards?

A secured credit card requires collateral to be approved, whereas an unsecured credit card is granted based on the applicant’s income, credit history, and credit score.

The second big difference is the credit limit. The credit limit in a secured credit card is based on the deposit made by us. That’s why we can achieve the limits we want. Almost all banks on average give credit limit up to 90% of whatever amount we deposit. The credit limit in unsecured credit cards is based on our income sources, credit history, and credit score.

A secured credit card helps make us have a good credit score because here the risk of the issuing bank is less.

The rest of these two credit cards work similarly. There is no difference in their functioning and usage.

Approval odds of secured vs unsecured credit cards

As we know with in unsecured credit card, the bank analyzes our financial information and then provides the credit card. That is why it has been difficult to get its approval. Whereas secured credit card we get it as collateral. Its approval is easily obtained.

You manage a good financial record by using your bank’s products effectively. Then banks can offer pre-approved credit cards. Alternatively, obtaining a secured credit card is the first step toward getting an unsecured credit card.

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Conclusion

There is no use in putting money into a fixed deposit and acquiring a credit card if you have an excellent credit score and a clean credit history. Assume your credit history is in poor shape, or you are applying for your first credit card. In this case, a secured credit card is great since it allows you to develop or rebuild your credit history while still enjoying the perks of a credit card.

Have you differentiated between a secured vs unsecured credit cards? For those looking to develop or rehabilitate their credit history, a secured credit card may be the ideal solution. Unsecured credit cards, on the other hand, may give benefits, but they may be more difficult to obtain if you do not have a high credit score. Think cautiously before applying for any credit card.

Disclaimer: This blog is solely for educational purposes.