Secured Credit Cards vs. Unsecured Credit Cards

Key insights:

• Secured credit cards require a security deposit and are ideal for building or rebuilding credit, while unsecured credit cards do not require a deposit and often offer better perks
• Unsecured credit cards typically require good credit and income for approval, whereas secured credit cards rely on the deposit, among other criteria, for qualification
• Secured credit cards generally have lower credit limits tied to a deposit, while unsecured credit cards may offer higher limits and perks such as cash back or miles
• Both credit card types can help build credit with responsible use, but choosing the right one depends on your credit history and financial goals

Getting a credit card can be a helpful way to establish or improve your credit. With responsible use, credit cards can help you build a credit history and reputation as a trustworthy borrower. When applying for a credit card, you may qualify for either a secured or an unsecured card.

The main difference between a secured and an unsecured credit card is that the former requires a security deposit.

Let’s take a closer look at the key differences between secured and unsecured credit cards and how to determine which type is the right option for you.

What is a secured credit card?

A secured credit card requires the applicant to make a security deposit before they can use it. This cash deposit is collateral and typically equals your credit limit on the card. The credit card issuer may keep the deposit if the cardmember doesn’t pay the balance due.

Additionally, responsible use may also help you build credit. Getting a secured credit card may be a smart and strategic choice for those who have little or no credit history and want to start building their credit.

What is an unsecured credit card?

Unsecured credit cards are likely what you think of when you hear the general term “credit card.” Unlike a secured credit card, an unsecured credit card doesn’t require a security deposit and is generally geared toward people with established credit. For this reason, credit card issuers may require a certain level of credit history and income to approve unsecured credit card applications.

Unsecured credit cards may also offer additional perks, such as the opportunity to earn cash back or points for eligible purchases.

What is the difference between secured and unsecured credit cards?

The key difference between these 2 types of credit cards is the security deposit requirement for secured credit cards.

Here’s a quick overview of how secured and unsecured credit cards compare across 4 key aspects:

Qualifications

To qualify for secured credit cards, you would primarily need a security deposit. To qualify for unsecured credit cards, on the other hand, issuers typically consider your creditworthiness and income.

Credit limits

Unsecured credit cards may offer higher credit limits, particularly for those with excellent credit. Secured credit cards typically tie your credit limit to your deposit, which serves as collateral for the issuer.

Rewards

Unsecured credit cards more commonly offer benefits like cash back and points, and many let you tailor those perks to your spending habits. Some secured credit cards may offer benefits, but it’s not as common.

User focus

Secured credit cards are generally more accessible to individuals with limited or not-so-good credit, allowing them to demonstrate responsible credit use over time. Unsecured credit cards cater more to those with established credit, often with stricter qualifications but more benefits.

Still, at a high level, secured and unsecured credit cards work similarly. For both types of credit cards, the issuer establishes a credit limit. The cardmember has a minimum payment due each month and must abide by the other terms of the cardmember agreement. Also, both secured and unsecured credit cards may charge interest on outstanding balances.

How much is the deposit for a secured credit card?

Depending on the issuer, your deposit may need to meet minimum requirements (such as a $200 minimum) or be within a defined range to qualify. The security deposit may equal the credit limit, which can help you choose your desired amount. For example, an approved applicant who deposits $500 may have a $500 limit on the credit card.

How can a secured credit card help rebuild my credit history?

If your secured credit card issuer reports your account activity to the 3 major credit bureaus, you can start building credit. For example, regular, on-time payments are important to building good credit and may help demonstrate to future lenders that you’re a responsible borrower.

When considering a secured credit card, check that the issuer reports your activity to the credit bureaus. This way, responsible credit card usage can improve your creditworthiness over time.

How to choose between secured and unsecured credit cards

If you’re looking to build or rebuild your credit, a secured credit card can be an accessible, helpful tool that essentially works much like an unsecured credit card. Alternatively, if your credit is strong enough to qualify, it may make sense to apply for an unsecured credit card to take advantage of benefits like earning cash back on purchases.

Before applying for a secured or unsecured credit card, carefully review the card’s terms and conditions to ensure they align with your spending habits and goals. Unsure where your credit stands? Use Citi’s pre-qualification tool today to see which credit card you may pre-qualify for without impacting your credit.

Secured vs. unsecured credit card FAQs

Is it better to have a secured or an unsecured credit card?

It depends on your situation. Secured credit cards are a useful option to build credit, while unsecured credit cards may offer better perks. Both, however, may require you to pay interest and make monthly payments.

Do you ever get your money back from a secured credit card?

Some issuers may return your security deposit on a secured credit card, provided you keep your account in good standing and pay off your balances. You can review your account terms to confirm, since credit card issuers have different policies.

How long before a secured credit card becomes unsecured?

Many secured card issuers let cardmembers upgrade to an unsecured credit card after a period of responsible use. Otherwise, you may need to apply for an unsecured credit card separately. In that case, it can take several months to start building credit, and it may take many more months to establish your creditworthiness.

You can check your credit reports for free to monitor your progress and understand when you may qualify for an unsecured credit card.

Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.