Secured or Unsecured Credit Card: Which best fits you?
Are you a beginner in the credit card world? Are you establishing or re-establishing credit? Are you planning to get a card? Take a moment in reading this article as it might enlighten you in searching for the right credit card.
Credit cards come in different nature, form, and features. The most common credit cards are issued by banks and other financial institutions. Some companies promote themselves using credit cards. This is the reason why you may have come to know about gas companies, department stores and groceries inviting you to sign up for their own credit cards. They are actually tied up with a certain financial institution who take care of the whole card issuance and process.
Credit cards are of two types: unsecured and secured credit cards. Unsecured credit cards are the most common type. These are the cards issued by financial agencies much like a loan. It has a credit limit or a credit line. Interests vary depending on the borrower's credit performance. Once it is issued and activated, it is ready for disposal. Your loan amount is equivalent to the credit limit plus interest incurred as you use your unsecured credit card. The chances of application being declined is very high for unsecured credit card, especially when the borrower has zero, poor, or fair credit ratings.
Secured credit cards, on the contrary, are cards that need some sort of a 'collateral,' or a deposit amount upon opening. The amount that you can afford to deposit becomes your credit limit. For example, if you have deposited $300.00 upon opening a secured card, that amount also becomes you credit limit.
There is a very slim chance that you can be declined when applying for a secured credit card, unless you have not made your deposit within a considerable amount of time after the date of application.
Secured credit cards are advisable for people who do not have credit ratings, have poor or fair credit scores, or those who are re-establishing credit ratings for the purpose of acquiring a new real estate property, car, boat, an RV or any huge expense that involve credit investigation.
Unsecured credit cards, on the other hand, are very suitable for people who have good or excellent credit. If they plan to add another card to their existing account, they would not have problems looking for unsecured credit cards.
Borrowers who are eligible to get unsecured credit cards can still enjoy comparing features, such as low interest, cash back and rewards, zero balance transfers, airline mileage, or business credit cards for those who own small and medium size business or corporations.
Both secured and unsecured credit cards have implication on a borrower's credit rating. The card issuers report credit card use, performance, and payment activities in the three giant credit bureaus.
Ultimately, whether the borrower uses a secured or an unsecured credit card, it is important to use it in moderation. It is likewise important to take care of your card, especially in a society where identity theft and fraud are prevalent.
Need to apply for a new card? Click here to browse and compare which suits you best, then hit the 'Apply Online' button.