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

In Washington, the difference between a secured and an unsecured credit card is defined by the Credit Card Law. A secured credit card requires a security deposit that functions as collateral for the credit line. The funds deposited by the cardholder secure the credit limit, which is usually equal to or less than the security deposit. To obtain a secured credit card, you must have sufficient funds in your bank account to cover the security deposit. An unsecured credit card does not require a security deposit. Instead, the credit limit is determined by the card issuer’s evaluation of your creditworthiness. The credit line is determined by factors such as your credit score, payment history, and income level. Since unsecured credit cards do not require a security deposit, they usually offer higher credit limits than secured cards. In Washington, both types of cards have the same laws and regulations, including minimum payment requirements and deadlines for payment. It is important to note, however, that with an unsecured credit card you will likely pay higher interest rates due to the higher risks associated with providing this type of loan.

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