Differences Between Secured and Unsecured Credit Cards

Secured and unsecured credit card differences

Knowing the differences between secured and unsecured credit cards is vital before you apply for a credit card. In this post, I contrast between the two, so you can make a better decision.


Applying for a credit card is a big financial decision. 

Taking the trial and error approach to applying isn’t a great idea, especially considering the stark differences between secured and unsecured credit cards. 

The two cards are for people in entirely different circumstances.

Finding the precise differences between the two types of credit cards can sometimes be challenging. And I’m here to help with that. 

In this post, I contrast between secured and unsecured cards and help you understand which one is better for you.

Differences between Secured and Unsecured Credit Cards

Padlock securing a black credit card

The primary difference between secured and unsecured credit cards is that you must make a deposit equivalent to your credit limit to get a secured credit card.

You can use a secured card as a regular card – they are supported by major card networks. But you must remember, a secured credit card is NOT a prepaid card. 

You will need to pay a credit card bill to avoid incurring charges – which are typically a lot higher than unsecured cards’ interest rates.

Then why get a secured credit card?

If you have no credit history or have bad credit, using a secured credit card wisely enables you to build or rebuild good credit history.

Unsecured credit cards have lower APRs and offer rewards, but getting approved for one requires you to have a decent credit score – around the mid-600s.

Analyzing the benefits and drawbacks of the different types of cards will make your decision easier.

Secured Credit Cards: Benefits Vs. Drawbacks


  • You can qualify even if you have bad credit: Getting back on your feet financially is a challenge as it is. The lower approval requirements make things a little easier. 
  • Your deposit is refundable: Paying to get a credit card can be off-putting. However, the deposit you make is refundable, and as long as you pay the balances on time, you will get your deposit amount back in full.
  • Makes building a good credit history easy: If you’ve never used a credit card before, or your credit score needs improving, a deposit-protected secured card can help you immensely.


  • No rewards: While some secured credit card providers offer small perks like cash back, most secured credit cards do not provide any other benefit than helping you build your credit back up.
  • No legislation on reporting to credit bureaus: For your credit score to build back up, your activity needs to be reported to the three bureaus. However, not all secure credit cards report to the bureaus. Make sure that you check with the provider before you apply for a card.
  • Need for deposit: Putting away a few hundred dollars can be very challenging on a tight budget. While you will get the money back eventually, it’s not convenient.
  • Low credit limit: The amount you deposit becomes the card’s credit limit. The minimum is typically $200, but your credit limit will be very small unless you don’t deposit a few thousand dollars.
  • High fees: In addition to the deposit, you may need to pay annual fees to get your hands on a secured credit card. Some card issuers also ask you to pay monthly maintenance charges and even processing fees.

Unsecured Credit Cards: Benefits Vs. Drawbacks


  • Lower running costs: If you have a well-established credit history and your credit score is in the good-to-excellent range, getting an unsecured card will cost you less over time. You will need to pay lower interests and fewer fees.
  • Excellent perks and rewards: Using a credit card strategically can make you money. Some cards offer perks like travel benefits and balance transfer deals.
  • Several options: There are hundreds of unsecured credit cards out there that offer some excellent benefits. Finding one that suits your lifestyle just right shouldn’t be very difficult.
  • Increased credit limits: Making bigger purchases is a lot easier with an unsecured credit card. You don’t have to worry about maxing out your credit card or hurting your utilization ratio and subsequently decreasing your credit score.

Unsecured Cards Drawbacks 

  • Widely varying approval qualifications: Not all unsecured credit cards are built the same, and credit score requirements vary widely. Even if you’ve been responsible for your credit, you may not qualify for the best-unsecured credit cards.

Which Credit Card Should You Get? 

If you have a good credit score and are in a good financial position, get an unsecured card. There are hundreds of options to pick from, and finding a card that gives you just the right benefits should be easy.

However, if you’ve never had a credit card before or recently had a setback and now have a bad credit score, you should get a secured credit card.

It's necessary to ensure that your budget can support the deposit and other fees. 

You must also ensure that the secured credit card you get reports to all three credit bureaus. All the trouble you take to increase your credit score won't matter if it doesn't reflect in your credit report.

Upgrading to an Unsecured Card 

Gold padlock beside a credit card

You can upgrade to an unsecured card after you’ve proven that you’re a responsible cardholder.

Get at least a year of responsible spending under your belt, and make sure you pay the dues on time.

Also, try and clear any other debts you may have during this time.

In time, your card issuer will automatically convert your card into an unsecured card and give you back your deposit.

However, if the issuer doesn’t do it for you, wait until your credit score reaches the mid-600s. After it does and you have a good credit history, you can request the issuer to do it for you.


Secured credit cards are an excellent credit score-building tool. The most important thing to remember when getting one is to check if the issuer reports your activity to at least one of the three credit bureaus.

The lack of reporting is a sign of a bad credit card.

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