What's The Difference?

Unlike regular credit cards, secured credit cards require a deposit to use. When you use a secured credit card, the deposit you pay is usually equal to your credit limit, which means the lender assumes no risk—if you don't pay your bill, they keep your deposit. On the other hand, regular credit cards are unsecured, which means that the lender allows you to borrow money without requiring a deposit, assuming that you will repay them later based on your credit history.

It's helpful to consider your situation when deciding between a secured and an unsecured credit card. A secured credit card could be a good option if you're starting to build credit or need to rebuild your credit. On the other hand, unsecured credit cards usually have higher credit limits and lower interest rates, and some even offer rewards or cashback.

What Are Secured Credit Cards, and How Do They Work?

Traditional (unsecured) credit cards function similarly to secured credit cards, but they require a deposit to use. You'll need to provide a cash deposit before using a secured credit card, which the lender will keep to back up the credit they extend to you.

One can use a secured card to pay for goods and services both in-person and online, just like any other credit card. Your credit limit—the most you can charge on the card—is usually the same as the cash deposit you made. A secured credit card deposit can range from a few hundred dollars to several thousand dollars.

These cards are often recommended to people with no credit history or who need to rebuild their credit score because you can't spend more than you've already paid to the lender.

If you have a secured credit card, make sure you pay your bill on time each month. If you don't pay your bill for several months, the credit institution will use your deposit to pay off what you owe, and your account may be closed as well.

Do Secured Credit Cards Help You Improve Your Credit Score?

Secured credit cards can help you improve your credit score, but there are a few things to keep in mind:

  • Check with your lender to see if they report to the credit bureaus. Your credit history is tracked by three major credit bureaus: TransUnion®, Experian®, and Equifax®. It won't help you build credit if your lender doesn't report your credit activity to at least one of the credit bureaus.
  • Make sure you don't fall behind on your payments. While a secured credit card is a great way to start building your credit history, make sure it's a good one. If you miss a payment, it can hurt your credit score and lead to interest charges.
  • Learn how credit scores are determined. Your credit score is calculated using several factors, including credit utilization and credit history length. You can make good decisions with a secured credit card if you know everything about calculating your credit.

Knowing that a secured credit card can help you build credit is essential, but it's also essential to consider the benefits and drawbacks of these cards before applying for one.

What Are Some Advantages & Disadvantages of Secured Credit Cards?

Secured credit cards are a helpful tool, but they also have drawbacks. When deciding whether a secured card is right for you, keep the following in mind:


  • If you have no credit history or have bad credit, this program can help you build credit.
  • Because the cash deposit enforces your credit limit, it provides an opportunity to practice responsible credit usage.
  • It works just like a regular credit card, allowing you to pay at a wide range of merchants, both in-person and online.


  • Monthly fees may be required, which can be costly over time.
  • Your card may have a low credit limit, making it insufficient for your needs.
  • High-interest rates are standard, quickly spiral out of control if you fall behind on payments.

If you get a secured credit card, you'll almost certainly want to upgrade to a regular credit card later. A regular credit card offers advantages and flexibility after you've built your credit and learned how to manage your spending.

What Are Unsecured Credit Cards, and How Do They Work?

You can use a credit card to pay for goods and services with money borrowed from a lender. The lender will keep track of all your card transactions and send you a bill each month. You'll have to pay at least a portion of the bill, but if you pay the balance in full, you'll avoid interest charges. You'll be able to borrow money up to your credit limit, which is a predetermined amount.

Here are some things to consider when using an unsecured credit card:

  • Credit cards are issued based on credit scores because lenders do not want to lose money in the long run. Higher credit scores indicate that borrowers have a history of repaying their debts, so lenders are less hesitant to extend them additional credit. People with lower credit scores, on the other hand, may have neglected to pay certain debts or do not have a long credit history, making them a higher risk to lenders.
  • Regular credit cards are called "unsecured" because a deposit does not back them. Because they can't simply access a deposit to pay off the balance like they could with a secured credit card, the credit card company will likely send your debt to collections if you don't pay your bill.
  • As your credit improves, you may be eligible for better credit cards with lower interest rates and higher credit limits, as well as other perks and rewards like cash back or special discounts. Furthermore, responsible credit card use can improve your credit score, leading to better loan options, such as car loans or mortgages.
  • Consider the benefits and drawbacks of obtaining an unsecured credit card before applying.

What Are Some Advantages & Disadvantages of Unsecured Credit Cards?

Unsecured credit cards, also known as credit cards, can be beneficial, but they have a few disadvantages to consider:


  • Higher credit limits are standard, making them valid for everyday and larger purchases.
  • Rewards and perks such as cashback or special discounts may be available.
  • Lower interest rates are usually involved, which is beneficial if you cannot pay your monthly bill in full.


  • If you have no credit history or poor credit, it can be challenging to qualify.
  • You may have to pay an annual fee to keep your account open.
  • Because terms can change over time, it's critical to keep an eye on interest rates.
  • Despite the disadvantages, unsecured credit cards are generally a good choice if you have the credit score to qualify for one and the habit of using it responsibly.

Is a Secured or Unsecured Credit Card Preferable?

There is no single answer to which is better because secured and unsecured credit cards have distinct advantages and disadvantages.

Instead, consider your requirements and circumstances to determine which type of card is best for you.

A secured credit card may be the right choice if you're looking to build or rebuild your credit or learn responsible credit habits. On the other hand, if you already have a good credit history and are looking for a card with higher spending limits or other benefits, you should look for an unsecured card.

Whatever type of card you get, once you start using one, you'll want to get into the habit of checking your credit report regularly. Keep an eye out for any erroneous information or phony accounts.

These misleading negative items can be an unnecessary stumbling block as you work to improve your credit score. If you notice something incorrect on your credit report, you can repair it.

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