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

The difference between a secured and a unsecured credit card lies in the way the credit is extended by the lender. A secured credit card requires a customer to provide an amount of money, usually referred to as a security deposit, as a guarantor of payment. This money is held in an account by the credit card company and is available for the customer to use. If the customer does not make payments on the card, the credit card company can take the money from the security deposit. In contrast, an unsecured credit card does not require the customer to provide any money as a security deposit. This is because the card is entirely based on the customer’s creditworthiness, which is determined by their credit history. The credit card company will assess the customer’s ability to make payments and if they pass, the customer will be approved for the card. The main difference between a secured and an unsecured credit card is the level of risk taken on by the credit card company. With an unsecured credit card, the company is taking on more risk as they are not relying on a security deposit to guarantee payment. Therefore, if a customer fails to make payments on an unsecured credit card, the company may have more difficulty collecting what is owed to them.

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

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