Secured vs Unsecured Credit Card: Pros and Cons for Consumers

Choosing between a secured vs unsecured credit card can feel like navigating a financial maze. While secured cards are great for building credit from scratch, unsecured cards are your ticket if you’re ready to unlock higher limits and rewards. 

By the end of this simple guide, you’ll understand the difference between unsecured and secured credit card options — and be equipped to pick the right one for your life (and your wallet).

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MoneyLion makes it easy to compare secured vs unsecured credit card options. Whether you’re building credit with a secured card or looking for the perks of an unsecured one, we’ve got the tools to help you find the best fit for your financial goals.

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What is a secured credit card?

A secured credit card acts as a financial safety net for people who are starting their credit journey or rebuilding after financial missteps. This type of card requires an upfront cash deposit — typically equal to your credit limit. For example, a $500 deposit grants you a $500 credit limit.

Secured credit cards are generally best for:

• Those with no credit history.
• Those rebuilding after financial challenges.
• Budget-conscious users aiming to establish good habits.

If you’re weighing an unsecured credit card vs secured card option, here’s the big difference: secured credit cards are easier to obtain but come with lower limits and higher fees.

Pros and cons of secured credit cards

Each individual situation is different — but understanding the pros and cons of secured credit cards is a good first step to help you decide between unsecured credit card vs secured credit card.

Pros	Cons
• Credit building: The benefits of a secured credit card include reporting payments to credit bureaus, which helps users improve their credit scores.	• Deposit required: You’ll need to pay an upfront deposit, unlike with an unsecured credit card vs secured.
• Easier approval: With less stringent credit checks, secured cards are accessible to those with poor or no credit.	• Lower credit limits: Credit limits are tied to your deposit amount.
• Graduation potential: Many issuers allow users to transition from secured credit cards vs unsecured options after demonstrating responsible use.	•Potential fees: Many secured cards include annual fees or other charges.

What is an unsecured credit card?

An unsecured credit card is the most common type of credit card. Unlike secured cards, these don’t require a deposit. Approval is based on your credit score, income, and financial history.

Unsecured credit cards are typically best for:

• People with an established credit history.
• Those seeking higher limits and rewards programs.
• Users who are confident in managing credit responsibly

Pros and cons of unsecured credit cards

Unsecured cards come with their own set of advantages and disadvantages that make them suitable for a different audience than secured cards.

Pros	Cons
• No deposit required: This is a key advantage when comparing unsecured vs secured credit card options.	• Stricter approval requirements: Approval for an unsecured credit card vs secured depends on your creditworthiness.
• Higher credit limits: Unsecured cards often offer higher limits, especially for users with excellent credit.	• Potential debt risks: Without discipline, users can easily accumulate high-interest debt.
• Reward programs: Many cards provide points, cashback, or travel rewards.	• Fee structures: Some cards charge annual fees, foreign transaction fees, and more.

Differences between secured and unsecured credit cards

Now that we’ve explored each card type on its own, let’s dive deeper into the specific differences between secured credit cards vs unsecured options.

Qualifications 

The difference between a secured credit card vs unsecured options starts with qualifications. Secured cards are easier to get approved for, making them ideal for those with poor or no credit history.

Deposit requirement

Secured credit cards require a refundable deposit, unlike unsecured cards.

Credit limits 

Unsecured cards typically have higher credit limits, while secured cards tie the limit to your deposit.

Interest rates 

Unsecured cards often have lower interest rates, though this varies by issuer. 

APR

Secured cards may come with higher APRs due to the elevated risk.

Fees

The fees for secured credit cards vs unsecured cards depend on the issuer. Both types of credit card fees may include annual fees or transaction charges.

Rewards 

Unsecured cards usually feature more extensive rewards programs. However, secured cards are increasingly offering benefits like cashback.

Building credit 

Both secured credit cards vs unsecured credit cards can help build credit. Secured cards are particularly beneficial for first-time users.

How to upgrade from an unsecured to secured credit card

Upgrading from an unsecured to a secured credit card is an exciting milestone. Here’s how you can make the transition and manage your new card well:

1. Build credit history: Use your secured card responsibly to improve your credit score.
2. Contact your issuer: Some banks automatically offer upgrades, while others require you to apply.
3. Choose wisely: Consider the benefits of a secured credit card and how an unsecured card aligns with your goals.

Secured vs Unsecured Cards: Which Is Better?

The decision between a secured vs unsecured credit card comes down to your financial situation and needs. If you’re starting out or rebuilding, secured cards are the way to go. For those with established credit, unsecured cards unlock higher limits and better rewards.

Whatever you choose, MoneyLion is here to help you navigate your options and find the card that best fits your goals.

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