There are several types of credit cards offered by different card providers in the market. Some cards provide rewards and exclusive perks. Some cards are no frills cards and easy to understand.
But credit cards are mainly categorized into secured and unsecured cards. These two types of cards are the common ones you often see in the market.
To avoid you getting confused with these two types of credit cards,we listed the differences between secured and unsecured credit cards.
Secured Credit Card
- Requires a deposit
Unlike in any other cards, a secured credit card like aub gold mastercard will require you to have a deposit account first before applying for a new credit card. This card is supported by a cash deposit that you need to supply. Commonly, the amount you deposited is your credit limit. In case you increase your deposit, your credit limit will increase as well.
- Fees
Compared to its counterpart, secured cards charge fees to their cardholders. These fees can take up a large amount on your credit limit. So, if you do not want to pay for different fees, do not select secured cards. Common fees are processing fees, late payment fees, and transaction fees, among others.
When to get a secured credit card?
If you want to build your credit, opt for a secured credit card. This type of card allows your credit account history to be reported to the credit bureaus. This way, you can have the chance to increase your credit score. Furthermore, a secured card can re-establish your credit profile in case you have a bad one.
Unsecured Credit Card
- No collateral required
Unlike in secured cards, unsecured credit cards will not require you to have a deposit account. The credit limit for this card will determine by the credit card company. Your credit risk is affected by factors, such as payment records, credit history, and credit score, among others. - Higher annual fees
Deposit accounts are not required for unsecured cards, however, card issuers may charge a higher annual fee. In some cases, this can be a lot expensive compared to deposit accounts. To avoid paying for annual fees, you can opt for card that does not have this fee like aub platinum mastercard.
When to get an unsecured credit card?
If you have a stable enough credit, you can go with an unsecured card. This type of card has higher credit limits compared to its counterpart. Also, it has a lower fee and loaded with various rewards and perks.
Final Thoughts
Secured and unsecured cards have its fair share of pros and cons. When applying for a new one, make sure that you identify first if it is a secured or unsecured one. Each one has its own fair share of pros and cons that will suit to different types of requirements.
It is important to know the differences between the two, so you will know which one you should get and suits your needs.