The Basics of Secured Credit Cards
How Secured Credit Cards and Unsecured Credit Cards Differ?
There are essentially two types of credit cards in the credit card marketplace -- secured credit cards and unsecured credit cards. Like many consumers, you might be wondering what the essential differences between these two types of credit cards are. If that’s the case, you are not alone. Many consumers don’t know or are confused about the differences between secured credit cards and unsecured credit cards. This should help clear a few things up.
The Fundamentals of Secured Credit Cards
Secured credit cards are credit cards that require a consumer to open a savings account with a specified amount of money to use as a security for the line of credit they are being extended. The amount of deposit required can vary depending on the offer, but the credit line is usually equal to the deposit amount.
Consumers who have never had a credit card before or who have a bad credit history might be good candidates for a secured credit card. A secured credit card provides the company who grants you credit assurance that your debt will be paid if you can’t or don’t make your payments.
The Fundamentals of Unsecured Credit Cards
Unsecured credit cards work differently than secured credit cards. Unsecured credit cards are simply a line of credit extended to you without you having to front any money to secure the debt. If you have a very low credit score, you might have difficulty qualifying for an unsecured credit card and you may have to start with a secured credit card to establish and build your credit history and rating.
Caveat Emptor
There are many scams that involve secured credit card offers, so be on the lookout for offers that don’t sound legitimate. No company or service can guarantee that you will qualify for a credit card. You will only qualify for a secured credit card or unsecured credit card after a credit card company runs a credit report on you and makes a decision, so don’t be lured in by schemes.
Finding the right credit card for you will take some time. At least now you can more easily evaluate credit card offers by understanding the basic differences between secured credit cards and unsecured credit cards.