If you are looking to get a credit card, you probably have heard of both secured and unsecured credit cards. A secured card requires you to pay an amount up front that will become your credit line. You are essentially using your own money to get credit. An unsecured card uses an account of credit that you have acquired without having to pledge an asset as security. A comparison of the attributes of each type of card will help you answer the question as to which type of card is right for you and your financial situation. Here is a breakdown of the differences in these two types of cards.
Accessibility
If you can provide the security deposit and fees, you can successfully apply to get a secured card. To get an unsecured card you will need to have a credit score at least in the mid 600’s. If you have shaky credit, a secured credit card is the best choice.
Interest Rates
Lately interest rates have risen for everyone. Secured cards are different from the norm, however, because you are backing your card use with a security deposit. It is very possible to find lower rates on secured cards compared to unsecured cards.
Quality of Service and Fees
The lack of options for consumers with bad credit will have an overall impact on the quality of service that they can expect to receive with their secured card account. Overall, you can expect unsecured credit accounts will get a better quality of service. There are many options for unsecured cards with no annual fees, but secured cards will always have an annual fee.
Money Management
For those that have issues with successfully managing money, a secured credit card is a great tool. It enables you to pay by credit card while not overspending, as your security deposit is your credit limit. The secured card acts as a control switch, which can help you avoid debt.
Benefits and Rewards
Despite the secured cards’ advantages in money management, they do not offer any type of benefits or rewards like points, miles, or cash back. On the other hand, unsecured cards compete with one another to attract the most credit consumers with their unique benefit and rewards packages. Even no annual fee cards use benefits and rewards to lure new customers.
There are pluses and minuses to each type of credit card, and many times it depends on what type of credit consumer you are to figure it out. If you are an adult with good established credit, a secured card option would be preferable over giving your teen daughter a card from your own account. If you have good credit and are disciplined with your money, then unsecured cards provide much more benefits and options than secured cards. Perhaps your goal in using credit cards is to rack up points and miles, then an unsecured card is the way to go. If you know that credit cards will tempt you to excessively spend, a secured card may be for you.When navigating the options between secured and unsecured credit cards, you are sure to find an option that suits your situation and lifestyle.