How to Choose Between Secured Credit Cards and Unsecured Credit Cards

Secured vs. unsecured credit cards: Here's what could be best for you — and your credit score.

When it’s time to get a credit card, you can choose an unsecured credit card or a secured credit card, each of which has its own advantages and disadvantages. You might be looking for a credit card to rebuild credit or you might be interested in credit card rewards and promotions. Whatever you’re looking for, make sure to evaluate the difference between secured and unsecured credit cards and determine which type is best for you.

How Secured Credit Cards Work

If you’re trying to rebuild your credit, consider a secured card. To get a secured credit card you must provide a refundable security deposit, which serves as collateral for your line of credit to cover your balance if it goes unpaid. Lenders still need to approve the credit card and you will need to complete the application process with financial and personal information along with your bank account number and routing number.

Get Credit Card Perks

Secured credit cards are good credit cards for bad credit borrowers and those who don’t have much of a credit history. Lenders reduce their risk because they can use your secured deposit to cover your balance if you default on payments. Your lender will return your deposit if you cancel the card, provided your account is in good standing. Learn about the best secured credit cards to see if they will help you in your situation.

A secured credit card works like a regular credit card in every other way. You’ll receive monthly statements and pay interest on anything you don’t pay in full for the statement period — so make sure you pay the full balance whenever you can. If you get a secured card, it can help you build your credit if you make your payments on time. When looking for the best secured credit card, compare several different offerings some of the best secured credit cards.

Get Credit Card Perks

Option: Discover it Secured Credit Card Review

How Unsecured Credit Cards Work

If you’re wondering how to get an unsecured credit card, you won’t need to provide a security deposit. If you have good or excellent credit you should be able to get approved for one. Many unsecured credit cards offer rewards programs that include cash back on purchases or airline miles and points.

As long as you make your payments on time an unsecured card can help you build your credit because issuers report balances and payments on these cards to the credit bureaus.

Compare these unsecured credit cards:

  • Blue Cash Preferred Card from American Express
  • Chase FreedomChase Slate
  • Capital One VentureOne Rewards Credit Card
  • Discover it Card

Related: How to Rebuild Credit

How to Choose Between Secured and Unsecured Cards

When deciding which card is best for you, consider these factors. An unsecured credit card gives you a line of credit without having to provide a security deposit. A secured credit card makes you provide a security deposit that’s equal or close to the credit limit — and you’ll lose that deposit if you don’t pay your bill.

Get Credit Card Perks

Having good credit usually means you can get approved for a wide range of unsecured cards, which often provide offers like rewards programs. If your credit is poor, you might be able to get an unsecured card, however, you’re more likely get approved for a secured credit card, which can be helpful if you’re rebuilding bad credit.

Use this chart as a quick reference for which type of card is best for you:

Credit History Credit Score Which Card to Choose
New Poor Secured
Established Good Secured or unsecured
Established Excellent Unsecured

Don’t Miss: 6 Easiest Credit Cards to Get

How to Choose the Best Credit Card for Bad Credit

Compare unsecured card offerings and look for cards that offer the lowest processing fees, the lowest interest rates, and a credit limit that will work for you. Here are some credit cards for bad credit:

  • Surge MasterCard
  • Total Visa Card
  • Milestone Gold MasterCard
  • Indigo Platinum MasterCard
  • Credit One Bank Platinum Visa

Up Next: 10 Best Credit Cards for Bad Credit

All information about American Express card offers have been collected independently by GOBankingRates and have not been reviewed or approved by American Express. These offers are not available through GOBankingRates.

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About the Author

Barri Segal

Barri Segal has 20+ years of experience in the publishing and advertising industries, writing and editing for all styles, genres, mediums, and audiences. She has been writing on personal finance topics for 12 years and gains great satisfaction from making a difference in consumers’ lives.

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