Have you ever faced a hard battle: secured vs unsecured credit card? Many people are still indecisive between the two. Indeed, each type of card has its own perks and deficiencies. They can work favorably for people who are in certain financial state, but less useful if used in other conditions. Learning more about these two cards will help you during decision making process.
Secured or Unsecured Credit Card
What is the main difference between secured vs unsecured credit card? When you are getting a secured credit card, you are expected to make a deposit since the start of your account creation. Meanwhile in the unsecured one you do not have to make initial payment. To card issuer, unsecured credit card loan is riskier if compared to the one that has security deposit. When issuing unsecured credit card, the issuer risks losing the amount of money borrowed by holder of unsecured card. The case is prominent especially if card holder does not obey the term of agreement of their account loan.
Discussing benefits of each card type is important when comparing secured vs unsecured credit card. Secured card is great because even with a poor credit score which is lower than 550, it is still obtainable. This is a great tool if you want to build or arrange your credit rating. With good planning, your poor credit rating can be improved as time goes on.
It is easier to apply for this type of credit card loan. In the worst scenario, when you are unable to pay off your balance and avoiding payments, your deposit will be taken by card issuer. You will never have to deal with forceful debt collector. Another unexpected benefit from this type of credit card is interest gained from saving deposit.
Meanwhile, something that makes unsecured card more tempting when discussing secured vs unsecured credit card is no requirement to make deposit at initial procedures. The amount can be very high, especially if you are looking to get high credit line. Credit card issuer has nothing of your possession to be taken when you are avoiding the debt.
This card also has more plus points in comparison of secured vs unsecured credit card. In general, unsecured card holder has lower expenses if compared to other type of cards. Unsecured card also offers more variety of benefits than the secured one. Its interest rates also tend to be lower. There are also rewards for various kinds of occasions. You can also receive cash back when making transactions using this card.
There are some flaws which will also help you deciding between secured vs unsecured credit card. Secured card often have hidden fees lurking around it. Issuer sometimes asks for annual fee and processing fee. Its interest can also be very high. Like secured credit card, the unsecured one also has many kinds of fees. Its interest rates can be high although not as high as the other card. There is no way to apply this card if you do not have good credit.