Are you undecided on whether to choose a secured or unsecured credit card? Read this secured vs unsecured credit card and then make your choice!
A whopping 189 million Americans have at least one credit card. From this stat, it is clear credit cards are a way of life in the United States.
Are you thinking of applying for a credit card?
Whether you’re looking to get your first credit card or a second one, you’ll have to choose between a secured and an unsecured credit card.
Which one should you go for? It depends on a number of factors.
Continue reading this secured vs unsecured credit card guide to learn how to find the ideal credit card for your needs.
But first off:
What’s a Secured Credit Card?
A secured credit card requires you to provide some form of collateral before your application can be approved.
In other words, a secured credit card is a type of a secured loan.
If you’re unable to pay your secured credit card balances, your card provider can repossess the collateral and sell it off to recoup the outstanding balance.
What’s an Unsecured Credit Card?
An unsecured credit card is the opposite of a secured credit card. The card provider doesn’t need any collateral to approve your application.
To get this card, a lot rides on your credit history as well as sources of income.
If you default on your unsecured credit card debt, the lender can only send your account to a debt collections agency, which will then try to get you to pay up.
Now that you know the difference between these two types of credit cards, let’s look at the various factors to consider when choosing the ideal one for you.
What’s Your Credit History?
If you have had a credit card for some time now, you definitely have a credit score.
If you don’t know your credit, get a copy of your credit report and see where you stand.
If you’ve got good or excellent credit, you need an unsecured credit card.
Because credit card companies can see that you have a good borrowing history, they’ll have no problem approving your application.
What if you’ve got no credit history or your credit score is bad or poor?
In this case, you need a secured credit card. Since lenders will find that you’re a high-risk consumer, they’ll only consider your application if you’re able to provide collateral.
This company can help you get credit cards even when you have bad or no credit.
What Credit Limit Do You Need?
Ordinarily, a credit company will determine your credit limit. This is what you’ll work with.
What if you want a higher limit?
Well, you have two options: prove to the company that you’ve increased your income and would thus be able to afford the higher limit, or offer to put up collateral with a value that’s at least equal to the limit you’re seeking.
As such, if you need a higher credit limit and your income hasn’t improved, your best option is to go for a secured credit card.
If you can attach your house as collateral, for instance, you’ll qualify for a significantly higher limit.
Secured vs Unsecured Credit Card: Make Your Choice
Getting a credit card is a savvy financial move, as long you’ll use it responsibly.
It’s also important to ensure you’re getting the right card for your needs.
With this secured vs unsecured credit card guide, there’s no doubt you’re now in a better position to find the ideal card.
Keep reading our blog for more tips and advice on personal finance.