Secured vs. unsecured credit cards
Secured credit cards are designed for people trying to build or repair their credit, and they tend to have less stringent creditworthiness requirements than unsecured cards.
Secured credit cards require a security deposit. The deposit amount is typically equal to the credit limit. If you can’t make payments, the lender can use the deposit to pay your balance.
Secured credit cards typically don’t have rewards programs, while unsecured cards may. Your credit limit will generally be on the lower end for a secured card (often equal to your security deposit). Credit limits for unsecured credit cards can vary, and may also depend on the card, your creditworthiness and other financial factors.
Applying for an unsecured credit card
Most unsecured credit card applications ask for basic information, such as your:
- Legal name
- Date of birth
- Social Security number or Individual Taxpayer Identification Number
- Amount and source of income
- Employment status
- Address and contact information
- Monthly housing or rent payment
Card issuers may use this information alongside your credit history to determine whether you’re approved.
Benefits and drawbacks of unsecured credit cards
Not having to tie up funds with a security deposit can be a major benefit of an unsecured credit card. That said, you may need stronger creditworthiness to be approved for an unsecured credit card. Many unsecured cards offer rewards programs that let you earn miles, cash back or points on qualifying purchases.
Before moving forward with an application, you might want to consider whether an unsecured credit card could tempt you to spend beyond your means. If you can’t make at least the minimum monthly payment, you could face late fees, interest charges and possible credit damage.
By using your unsecured credit card responsibly and making timely payments, you may see your creditworthiness improve over time.
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.
