Do you own a credit card? Now let me ask you this, is it a secured credit card or is it an unsecured credit card? Chances are it’s an unsecured credit card. So you might be wondering, what’s the difference between a secured credit card and an unsecured card?
In this post I will be explaining the difference between the two and which one would be right for you.
Unsecured Credit Cards
These credit cards get their name from the fact that they aren’t backed by any type of asset. In fact a credit card is a loan in itself just like a mortgage is for your home, except a mortgage is backed by an asset, the house.
So how do the credit card companies know how much credit to give you? They look at your credit history and if you have a great credit score and no mistakes on your credit report you’ll be allowed access to a greater limit.
The down side to these cards however is the fact that you have to usually have somewhere between good and excellent credit to get one which is where the secured version comes in.
Secured Credit Cards
How a secured credit works is that you aren’t given credit based your credit score but rather by depositing money towards the card much like a debit card.
In this sense the risk of the card is not held by the credit card company now but instead is now placed on you. If you fail to make payments it’s because you failed to add money to your card and maintain it properly.
The great thing about these cards are the fact that you don’t need great credit to get one, and that over time with managing the card properly you will also build up your credit.
So Which Is Better
Both types of cards have their advantages. However if you look at the statistics the 10 top credit cards that people are using are unsecured cards. Though you still have to find what is right for your situation whichever type you choose to make use of.
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