Difference Between Secured and Unsecured Credit Card
Where the normal credit card is issued after providing sufficient security deposit then such credit card is known as secured credit card and it is generally issued to those individuals and companies which lack credit in the market whereas unsecured credit cards are marketed to those customers with fair credit and having good image in the market and generally issued to those having trouble in approval of prime credit cards accounts.
Secured credit cards are just like a deposit that a person does in a bank and in lieu of that, they will get a credit card against that amount of deposit.
On the other hand, unsecured credit cards are those kinds of credit cards that do not depend on the fixed amount and are mainly given on the salary band and the credit score of a customer.
In this article, we look at the key differences between secured credit cards and unsecured credit cards.
Secured vs Unsecured Credit Card Infographics
Key Differences
The key differences are as follows –
- Secured credit cards are fairly easy to get when compared with unsecured credit cards as the customer is getting a limit against the fixed deposit he has deposited with the bank which makes the creditworthiness of the customer good also the bank has less risk on the cards issued. On the contrary unsecured credit cards are difficult to get as a number of documents are required to be submitted with the bank such as the credit score, salary slip, income tax proof, and other documents.
- In secured credit cards, the amount of deposit that is submitted with the bank determines your limit of the credit card they are also known as a chance card for a reason. On the other hand, the credit limit of an unsecured credit card is at the discretion of the bank and the bank determines the credit limit of that user which is based on a number of factors such as credit score, salary drawn by the customer and past credit history.
- Using a secured credit card will help the user to live within the means of his financial capabilities as it does not have the facility of an overdraft and the usable amount is only restricted to the amount which is deposited in the fixed deposit. On the other hand, an unsecured credit allows you to extend your means beyond your credit holding limit.
Comparative Table
| Secured Credit Card | Unsecured Credit Card | |
| A secured credit card is backed by a cash deposit in the bank and the bank issues a card with that limit to the customer. | An unsecured credit card is not backed by any cash deposit that needs to be submitted with the bank. | |
| Secured credit card the bank demands for collateral. | There is no collateral involved in unsecured credit cards. | |
| Secured credit cards often do not have any rewards point and other fringe benefits associated with their cards. | Unsecured credit cards have a variety of fringe benefits such as reward points, special discounts when payment done with the cards. Cashback opportunities etc. | |
| Secured credit cards have generally issued that kind of person who post-bankruptcy has a bad credit cycle and credit history. | Unsecured credit cards offer benefits and are generally issued to those who have a good credit history and high creditworthiness. | |
| There are usually high annual fees involved in these kinds of credit cards. | Unsecured credit cards usually involved low annual fees, as well as there, are not any hidden charges charged by the bank. |
Conclusion
A good credit card is the one that helps the user according to the risk appetite financial stability of the customer and its spending patterns. Customers having similar and recurring spending patterns should opt for a secured credit card as there is not much of a change in the spending pattern of a customer on a month on month basis.
On the other hand, if the customer has a good track record of spending and paying off his debts on time then he should opt for an unsecured credit card where the user has an unusual spending pattern and a good credit score.
There are nowadays various banks offering various credit cards. If the user often uses the same portal on a frequent basis he should opt for a credit card that has an association with that particular vendor.
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