Why You Want an Unsecured Credit Card

Whether you’re looking to build credit, take advantage of the rewards some credit cards offer, or you simply like the convenience of swiping a card over carrying cash, you will undoubtedly receive offers for unsecured credit cards. If you’re unsure what an unsecured credit card is, continue reading for more information and understand why you want one.
 
Among the credit card options, you might see unsecured versus secured credit cards, and you might be wondering how secured, and unsecured cards differ and why it matters.
 
Unsecured credit cards are the most common credit cards available to the general public. These types of credit cards do not need a security deposit for you to be approved to use the card. You will also not have to put down a security deposit if you are looking to increase your credit line once you have the card.
 
Without that collateral, this type of card presents a bit more risk to lenders, so you might have to pay slightly higher interest rates compared to other cards. Often credit card APRs will vary based on the customer due to varying levels of risk for the lender. If you have a better history with credit cards, your APR might be lower than someone with a lower credit score, as you have demonstrated that you are more likely to be able to pay off the debt.
 
For a secured card, you will first have to put down a security deposit or collateral to start using the card. The amount you put down as a deposit will dictate how much of a credit limit you will have on the card. Because of this, secured cards are often used by those with bad credit or no credit. They can help you build positive credit and increase your credit score.
 
With an unsecured card, your approval and the overall credit limit are decided based on factors, including your credit score, your repayment history, and your earnings. If you have been a responsible credit card user with a decent credit score, you will have an easier time being approved for an unsecured credit card.
 
If you are unable to make payments on the balance of your unsecured credit card, the lending company will have the option to report your delinquency with a credit bureau. This can lead to court settlements or even wage garnishment if you are unable to pay your balance.
 
With a secured credit card, the company will simply have the right to take your deposit to cover your balance. You can think of it as a secured loan that you might take out. If you cannot make payments on your house or your car, the lender would be able to seize the asset.
 
While the majority of cards are unsecured, you might run across a secured card when you’re researching which card might be the best fit for you. How will you know if the card is secured or unsecured? Simple. Secured cards will always have the word “secured” in the title. Capital One Platinum Secured Credit Card, Discover it® Secured Credit Card, and Citi® Secured Mastercard® are just some options available if you are in the market for a secured credit card.
 
Now that you understand the differences between an unsecured and a secured card, we can discuss why you would want to open an account for an unsecured credit card.
 
One of the major benefits of an unsecured card is that you don’t have to have a large chunk of money to put down as a deposit upfront. If you have that money, it could be collecting interest for you in a bank, whereas if it is a deposit for a credit card, it is not working for you.
 
The benefits and rewards offered through an unsecured card are also better. These cards will usually have lower (if any) fees, and you can have a higher credit limit. Some perks and rewards are offered through unsecured cards that are just not available with secured credit cards.
 
Often unsecured cards will allow you to earn cashback or travel points with purchases. Some other cards will give you special offers, like early access to sales. These are perks that are not available through the secured credit cards.
 
If you cannot manage your money or credit cards successfully, you might benefit from a secured credit card. Overall, choosing an unsecured card will offer more benefits and allow your money to work for you instead of the alternative. 
 
Ultimately, it is important to use your credit cards wisely and responsibly. Try not to carry a high balance on your cards to limit the amount of interest you will have to repay over time.