What’s the difference between a secured and unsecured credit card, and which one is better?
Secured Credit Cards are generally used to help people raise their FICO scores, or the line of credit that companies are typically offering them. The term “secured” comes from the fact that you must open a savings account and deposit a minimum amount of money (usually $200 or more) into the account before you can use the card. Your savings account generally reflects the amount of credit you have on the card.
Secured credit cards generally accept everyone, and are an easy way to start building or rebuilding credit.
Unsecured Credit Cards are simply credit cards that do not require a security deposit on the account. This type of card is often subject to credit checks and credit approval. Unlike a secured credit card, you generally cannot increase the credit limit whenever you want to. If that’s the case, then why bother with an unsecured credit card? Well, they don’t require hundreds of dollars to activate, and they often have much lower interest rates and fees than a secured credit card.
So, which one is better: secured or unsecured? Here’s a little secret: your credit report does not reflect whether you have a secured or unsecured credit card. So, the one that you should choose depends on your situation:
- If you have a bad credit score and cannot get approved for other credit cards, or if you want to increase the lines of credit other companies are willing to offer you, you should consider getting a secured credit care.
- If you have a decent credit score and you want lower interest rates, then you should go with an unsecured credit card.
As most everything in life, it all depends on your unique situation.
[tags]secured credit card, unsecured credit card, bad credit cards[/tags]