Access to credit is significant for individuals and businesses. It is an essential tool to make purchases, pay bills, and secure loans. The common distinction between credit cards is whether they are secured and unsecured. The following points provide the difference between unsecured and secured credit cards.
One of the differences of a secured vs. Unsecured credit card is the underlying purpose to users. A secured credit card emphasizes on helping people create a credit score or improve their current credit standing. In getting a secured card, it is best to identify whether the product can assist in resolving your bad credit problem. Look for a provider that reports your progress to credit institutions.
Unsecured credit card focuses on helping people access to a specific credit limit. Individuals who apply for the card gain the advantage of increasing their purchasing power or avail of benefits and rewards. It is important to emphasize that applying for an unsecured card requires that you already have an existing credit score and good credit standing. If you do not, then it is likely that companies will decline your application and negatively impact your score.
Upfront Deposit Requirements
Another significant distinction between secured vs. Unsecured credit card is upfront deposit requirements. The approach specifically applies to secured credit cards where applicants need to provide an initial amount to get approval. The basis for the approach is that it reduces the risk of credit card companies in situations where you are unable to pay your debt. The money serves as security and collateral. That is why people who use secured credit cards focus on building their credit score.
On the other hand, unsecured credit cards do not have an upfront deposit requirement. Rather, financial institutions grant applications by credit ratings. They determine the credit limit and interest rates on how an individual manages their spending. For instance, people with good credit standing and limited debt can access higher limits and better interest rates compared to people with bad scores and massive debt.
Switching Credit Card Type
Lastly, there is the distinction on how credit card companies allow users to change from secured to unsecured cards and vice versa. Getting a secured card is significant because it helps credit card companies assess your ability to manage debt and payments. If you consistently show responsibility in settling your dues, then it is easier to switch to an unsecured card. Sometimes your credit card provider will automatically upgrade your account, or you can request if you qualify for an unsecured card. You also have the chance to switch from an unsecured card to a secured credit card. It is a good strategy for people trying to improve their score and create ways to control their spending.
Your choice of getting a secured or unsecured credit card corresponds to your current situation. A secured card is best for people just starting to develop their score or keen on controlling their spending habits. An unsecured card is best for people with good credit standing and wants access to higher limits. With each decision, you need to be aware of interest rates, requirements, and your responsibility to settle payments.
Know more about the difference between secured and unsecured credit cards at applyforcredit.cards. Also, find more useful tips at http://files.consumerfinance.gov/f/documents/201702_cfpb_Consumer-Tips-on-Managing-Spending.pdf.
Curious about the difference between secured and unsecured credit cards? We cover the basics, give you tips, and more at applyforcredit.cards.