What is the difference between a secured credit card and an unsecured credit card?

A secured credit card and an unsecured credit card are both types of credit cards, however, they differ in how they are used and the terms of the agreement. A secured credit card is backed by a deposit that you make with the issuer. This deposit serves as collateral and is used to secure the card. When you make purchases with the card, you will owe the issuer the amount you charged, plus interest. The deposit works like an insurance policy in case you are unable to make payments. An unsecured credit card, in contrast, is not backed by a deposit, and the issuer does not require one for approval. Instead, the issuer looks at your credit history to determine whether you are a reliable customer. The issuer will also set a credit limit based on your past credit performance. With an unsecured credit card, you owe the issuer only the amount charged, plus interest, and there is no need to pay a deposit. Both secured and unsecured credit cards can help you build or rebuild credit, but the fees and interest rates that come with them can differ. In Texas, state law requires credit card companies to clearly disclose all fees and terms when you apply for either type of card. Be sure to review all of the information carefully to make sure you understand the costs associated with each option.

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What is the difference between a secured credit card and an unsecured credit card?

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