Secured vs. Unsecured Credit Cards – The Facts and Figures

There’s a lot of jargon in the world of credit cards, and as a smart consumer, you will be responsible for not only learning the different terms used through the credit and finance world, but also making sure that they make sense to you. After all, it’s not just enough to know what something is called these days — you have to know how it actually works.

Two terms that you will need to learn quickly are secured and unsecured — well, as they relate to credit cards that is! You have to make sure that you know the differences between a secured card and an unsecured card. In a nutshell, a secured card is backed by money that you actually give to the credit card company in exchange for a credit card. If you default on the credit card, they have every right to take your money and apply it to the charges that were made on the card — with you ultimately paying the difference. This can be a good way for people with bad credit to re-enter the market and get their start towards better credit in the long run. It can definitely take a while to get things back to rights when you have a secured credit card, but it is possible to do.

On the other hand, an unsecured credit card behaves much the way we expect — it doesn’t require any collateral whatsoever. It’s all about how creditworthy you look in the eyes of the credit company — they have to issue you the card based on approval. If they feel like you’re not going to be someone that will repay the debt, they will not issue you a card. If you try to misrepresent yourself or your income, you could end up being charged with credit card fraud — something that we all want to avoid.

Which one is right for your situation? Well, only you can determine that. If you have very bad credit or if you’re just starting out, you might feel better going with the secured credit card until you get your footing in life. On the other hand, you might want to go with an unsecured credit card if you know that you can handle the higher spending limit. Either way, you will have a credit card that can make reservations a lot faster and payments run a lot smoother — check it out today!