Difference Between Secured and Unsecured Credit Cards
Gone are the days when you had to carry hard cash while shopping clothes, furniture, and even groceries. With the introduction of credit cards, you do not have to worry about the fact that you have insufficient hard cash to buy things that you like. The most popular and authentic credit cards are MasterCard, Visa, American Express, etc.
These cards are accepted in most stores and malls as well as small local shops, where you just have to get your credit card swiped and sign the bill to make your payment. But, many do not know that credit cards are of two types―secured and unsecured. Both these credit cards look the same, but there is a lot of difference in the way they function. Let us evaluate the difference between the two types of credit cards.
Secured Credit Cards
Secured credit cards were introduced much later than unsecured credit cards, and are given to individuals with a bad or no credit history. To acquire a secured credit card, one has to set a credit limit for oneself, and deposit it in an account to get a credit card. While using a secured credit card, one can only spend money within that credit limit and sometimes, 100% of the money present in the account. Secured credit cards are good for people who do not have a firm control over their expenses. Besides, people who receive a secured credit card do not have to worry about creating debts for themselves.
Unsecured Credit Cards
Unsecured credit cards are for those who have a good or fair credit history. While issuing an unsecured credit card, a credit company checks the credit records, number of working bank accounts, history of paid and missed bills, etc., of the applicant. According to these records, the applicant would be given a credit card with a credit limit.
The person whose credit history is very good will get a card that has a high credit limit. With this credit card in hand, one can bear his monthly expenses like paying various bills, shopping, etc., and later would receive a bill on the total expenses he made in that month. This bill has to be paid monthly, but the customer has the privilege to pay money either partly or fully each month.
To acquire an unsecured credit card, one does not have to deposit any money, but may have to pay a membership fee. However, if one is not able to pay back the company for a long period of time, there are chances of debt piling up. Unsecured credit cards are good for people who have control over their finances, and enough resources to pay back what they have taken from the company.
Any credit card, be it secured or unsecured, is similar in appearance and is accepted at all places. Moreover, both are convenient methods of spending money. However, an individual’s financial status, ways of spending money, and paying it back, would determine which credit card is better for him or her.