Secured vs. Unsecured Credit Card

Woman with laptop and credit card

If you’re attempting to open a new credit card account with a bad credit score, you may have been recommended to apply for a secured credit card. What is the difference between a secured vs. unsecured credit card? The most notable difference is that secured credit cards require a security deposit to open, while unsecured cards do not. Learn more about how these credit card options differ and their respective risks and benefits to your credit with Xpress Cash, below.

Secured Credit Card vs. Unsecured Credit Card: Know the Differences

As we noted above, secured credit cards require a security deposit to open, while unsecured cards do not. However, that’s not the only difference you should know about:

  • Credit Limit
    • Secured Card: Typically, the amount you put down as a security deposit on a secured credit card becomes your credit limit for that card. Depending on your card issuer, you may be allowed to add money to that deposit to increase your credit limit in the future. 
    • Unsecured Card: Because unsecured credit cards have no security deposit associated with them, your credit limit will be set by the card issuer. Your limit is based on your creditworthiness, payment history, and other factors that point to how financially responsible you are. 
  • Credit Score
    • Secured Card: The reason secured credit cards require a security deposit is that they’re most often marketed toward individuals who have bad or even no credit. That said, you could get a secured card with a good credit score, but it often makes more sense to get the unsecured card if you’re in a position to do so.
    • Unsecured Card: Unsecured credit cards are typically reserved for individuals with a good credit score. There are some unsecured cards on the market which are designed for applicants with bad credit, but the cost typically outweighs the benefits as they usually come with higher fees and interest rates.

How Can Each Option Affect Your Credit?

If used responsibly, a secured credit card can be a great way to improve your credit or start establishing credit if you don’t have a history. Likewise, using an unsecured credit card responsibly can raise your credit from “good” to “excellent” if you’re already in good standing. 

On the flip side, both secured and unsecured credit cards can also pose a risk to your credit. If your credit card utilization ratio is too high, your credit score can take a hit. Or, if you’re unable to make your minimum payments on time each month, they can show up as missed payments on your credit report and, again, your credit score will take a hit.

Turn to Xpress Cash for Additional Help

When you’re in need of financial advice you can trust, the friendly staff at Xpress Cash is here to help. Contact us or visit one of our Michigan locations to learn more today, and find out about our cash advance loan options while you’re at it.