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Unsecured vs. Secured Credit Cards: Pros and Cons

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Finance management is a headache for most of us. There’s no denying that. It’s especially complicated when it comes to loans, debt, and credit cards. If you are interested in improving your financial knowledge, read more about finance on MoneyFor’s blog — there are numerous guides on achieving your financial freedom. In this article, we will help you understand credit card types better.

For many people, that first card is the key that opens the door to building a solid credit history. But when your score is low or non-existent, that door can seem firmly locked. That’s where secured and unsecured credit cards come in — two different tools to help you gain access.

But which one is the right fit for your financial situation? Let’s take a closer look at unsecured vs. secured cards, weighing the pros and cons of each option.

What Is an Unsecured Credit Card?

An unsecured card is what most people think of as a standard credit card. The bank issues you a credit line that is not secured by a deposit from you. This type of card is convenient, but to get approved, you typically need a credit score in the good to excellent range (670+).


  • No security deposit is required upfront
  • A wider variety of cards with rewards programs
  • Helps build credit when used responsibly
  • More opportunities for higher limits over time


  • Hard to get approved with a poor or no credit history
  • Higher fees if approved with a low score
  • High-interest rates if you carry a balance
  • Risk of serious debt if spending gets out of control

What Is a Secured Credit Card?

A secured card requires you to pay a refundable security deposit upfront, which typically becomes your credit limit. This deposit reduces the risk for the lender. But you can still benefit from getting approved and building your score through responsible usage.


  • Easier to qualify for and get approved
  • Fixed and lower security deposit compared to first year’s fees on many unsecured cards
  • Can help rebuild a poor score
  • Deposit is refundable if you do not miss any payments (unlike annual fees)


  • Upfront deposit limits your available credit
  • Harder to qualify for higher limits
  • May have higher fees than unsecured cards
  • Some secured card annual fees can be high
Building credit
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Building Credit — The Right Way

Both secured and unsecured cards give you the power to build your credit history through consistent, on-time payments over time. But they come with different cautions as well.

With an unsecured card, missing payments can really set you back, impacting your score and leading to costly late fees or higher interest charges. There’s also the risk of falling into cyclical debt if you can’t pay the full balance each month.

A secured card removes the risk of getting in over your head in debt — you can’t spend more than your deposit allows. But fees can add up, effectively reducing the amount of funds available to you if you don’t use the card responsibly.

Other Factors to Consider

In addition to comparing deposit requirements and credit score impacts, look at each card’s:

  • Annual or monthly fees and interest rates
  • The offered limit and potential for increases
  • Rewards programs (more common with unsecured cards)
  • The possibility of upgrading to an unsecured card
  • Whether the secured deposit is fully refundable after upgrading or closing the account in good standing
  • The possibility of your payment history being reported to the major credit bureaus (important for building credit)
  • Whether the card issuer will review your account periodically for a credit limit increase based on your payment history

When evaluating fees, pay close attention to the total first-year costs. Many unsecured cards for those with poor credit have annual fees of $75 or more in the first year, plus one-time charges. So the total can exceed a typical secured card deposit amount.

It’s also important to understand if your secured deposit is truly refundable after upgrading or closing the card in good standing. And know whether your card’s bank has a definite upgrade pathway to an unsecured card after a period of responsible use.

At the end of the day, whether a secured or unsecured option makes more sense, depending on your current credit situation and financial capabilities. A secured card can be a wise choice to establish or rebuild credit by adding an open and active tradeline to your reports. For those able to get approved, an unsecured card may offer more back-end benefits — although it requires more discipline.

No matter which you choose, consistent on-time payments are key to ensuring your first (or next) card helps pave the path to a brighter financial future. Used responsibly, both card types can be powerful tools for building toward greater financial stability and access over time.

Featured Image by Steve Buissinne from Pixabay