Secured and Unsecured Credit Card Differences

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Secured credit cards are just like deposits that a person does in a bank, and instead of that, they will get a credit card against that amount of deposit. On the other hand, unsecured credit cards do not depend on a fixed amount and are mainly based on the salary band and a customer’s credit score. This article looks at the key differences between secured and unsecured credit cards.

Secured vs Unsecured Credit Card Infographics

Let us see the top differences between a secured and unsecured credit card.

Key Differences

The key differences are as follows: –

  • Secured credit cards are fairly easy to get compared with unsecured credit cards. The customer receives a limit against the fixed deposit he has deposited with the bank, which makes the customer’s creditworthinessCreditworthinessCreditworthiness is a measure of judging the loan repayment history of borrowers to ascertain their worth as a debtor who should be extended a future credit or not. For instance, a defaulter’s creditworthiness is not very promising, so the lenders may avoid such a debtor out of the fear of losing their money. Creditworthiness applies to people, sovereign states, securities, and other entities whereby the creditors will analyze your creditworthiness before getting a new loan.read more good. The bank has less risk on the cards issued. On the contrary, unsecured credit cards are difficult to get. Several documents must be submitted to the bank, such as the credit score, salary slip, income tax proof, and other documents.The amount of deposit presented with the bank determines your credit card limit in secured cards; they are also known as chance cards for a reason. On the other hand, the credit limit of an unsecured card is at the bank’s discretion. The bank determines the credit limit of that user based on several factors such as credit score, salary drawn by the customer, and past credit history.Using a secured credit card will help the user live within the means of his financial capabilities as it does not have an overdraftOverdraftOverdraft is a banking facility that offers short-term credit to the account holders by allowing them to withdraw money from their savings or current account even if their account balance is or below zero. Its authorized limit differs from customer to customer.read more facility, and the usable amount is only restricted to the amount deposited in the fixed deposit. An unsecured credit allows you to extend your means beyond your credit holding limit.

Secured vs Unsecured Credit Card Comparative Table

Conclusion

A good credit card is the one that helps the user according to the risk appetiteRisk AppetiteRisk appetite refers to the amount, rate, or percentage of risk that an individual or organization (as determined by the Board of Directors or management) is willing to accept in exchange for its plan, objectives, and innovation.read more financial stability of the customer and its spending patterns. Therefore, customers with similar and recurring spending patterns should opt for a secured credit card as there is not much change in a customer’s spending pattern on a month-on-month basis.

On the other hand, if the customer has a good track record of spending and paying off his debts on time, he should opt for an unsecured credit card with a distinctive spending pattern and a good credit score.

There are nowadays various banks offering various credit cards. Therefore, if the user uses the same portal frequently, he should opt for a credit card associated with that particular vendor.

This article is a guide to Secured vs Unsecured Credit Cards. We discuss the difference between secured and unsecured credit card and a comparison table. You may also have a look at the following articles: –

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