Difference Between Secured and Unsecured Credit Cards

Introduction

If you’re looking to build credit or improve your financial profile, understanding the difference between secured and unsecured credit cards is crucial. Both types of cards can help you manage expenses and establish credit history, but they work in very different ways. Choosing the right one can save you money, reduce risk, and speed up your credit-building journey.

In this guide, we’ll break down what secured and unsecured credit cards are, how they work, their advantages and disadvantages, and which option is best for you in 2025.

What Is a Secured Credit Card?

A secured credit card is a type of credit card that requires a cash deposit as collateral. This deposit acts as security for the lender in case you fail to make payments. The deposit amount typically becomes your credit limit. For example, if you deposit $500, your credit limit is usually $500.

Secured cards are designed for people with poor or limited credit history. They’re often used by beginners who want to start building or rebuilding their credit scores.

Related : What Happens If You Never Use Your Credit Card?

Key Features of Secured Credit Cards

• Security Deposit Required: Usually between $200 and $1,000.
• Easier Approval: Ideal for those with low or no credit scores.
• Credit Building Tool: Reports to major credit bureaus.
• Lower Risk for Banks: The deposit minimizes the lender’s risk.
• Potential Upgrade: Many issuers allow you to upgrade to an unsecured card after consistent payments.

Example of Secured Credit Cards

• Capital One Platinum Secured Credit Card
• Discover it Secured Credit Card
• OpenSky Secured Visa Credit Card

What Is an Unsecured Credit Card?

An unsecured credit card does not require a deposit. Instead, your creditworthiness determines your approval and credit limit. These cards are the most common type of credit card in the U.S. and are available in various categories, including rewards cards, cashback cards, travel cards, and low-interest cards.

Unsecured credit cards are best suited for people with good to excellent credit who want to enjoy perks, earn rewards, and have higher spending power.

Related : Personal Loans vs Credit Cards: Which is Better?

Key Features of Unsecured Credit Cards

• No Security Deposit Required
• Higher Credit Limits depending on credit score and income
• Better Rewards Programs such as cash back, travel miles, or points
• More Perks and Benefits like insurance, airport lounge access, and purchase protection
• Strict Approval Criteria — may require a higher credit score and stable income

Example of Unsecured Credit Cards

• Chase Freedom Unlimited
• American Express Blue Cash Everyday
• Citi Double Cash Card

Main Differences Between Secured and Unsecured Credit Cards

Feature	Secured Credit Card	Unsecured Credit Card
Deposit Required	Yes	No
Credit Limit	Based on deposit	Based on credit score
Approval Chances	High (for beginners)	Moderate to Low (based on credit)
Rewards & Perks	Minimal or None	Wide variety of rewards
Ideal For	Building or Rebuilding Credit	Established Credit Users
Annual Fee	Often Low or None	May vary based on card type
Credit Reporting	Yes, to all bureaus	Yes, to all bureaus
Upgrade Option	Possible after good history	Not applicable

Pros and Cons of Secured Credit Cards

Pros

• Easier approval even with bad credit
• Helps build or repair credit history
• Can transition to unsecured credit over time
• Forces responsible spending habits

Cons

• Requires upfront deposit
• Limited rewards and benefits
• Low credit limit initially
• May have annual or maintenance fees

Pros and Cons of Unsecured Credit Cards

Pros

• No deposit required
• Higher credit limits and spending flexibility
• Better reward programs and perks
• Improves credit score with responsible usage

Cons

• Harder approval for low credit scores
• High interest rates for poor credit applicants
• Can lead to debt if misused
• Late fees and penalties can impact credit score

Which One Is Right for You?

Your choice depends on your current credit situation and financial goals.

• If you’re new to credit or rebuilding after past mistakes, a secured credit card is your best starting point. It gives you a safe and structured way to establish trust with lenders.
• If you already have a stable credit score and want rewards, an unsecured credit card offers greater value and flexibility.

A smart strategy many experts recommend is starting with a secured card and upgrading to an unsecured one after six to twelve months of responsible use.

• Always pay your bill on time.
• Keep your credit utilization below 30%.
• Avoid unnecessary applications within short periods.
• Monitor your credit report regularly.
• Upgrade or request a limit increase after showing consistent positive history.

Related : Personal Loans vs Credit Cards: Which is Better?

Conclusion

Both secured and unsecured credit cards have their place in personal finance. Secured cards are your gateway to building credit safely, while unsecured cards reward responsible users with higher limits and perks. Understanding their differences ensures you make informed choices that align with your financial goals in 2025.

When used wisely, either card can become a stepping stone toward excellent credit health and greater financial freedom.

Learn more about how credit cards work on the Consumer Financial Protection Bureau website.

Visit Experian’s guide on secured vs. unsecured credit cards for more insights.

FAQs: Difference Between Secured and Unsecured Credit Cards

1. What is the main difference between secured and unsecured credit cards?
A secured credit card requires a refundable security deposit as collateral, while an unsecured credit card doesn’t require any deposit and is based on your creditworthiness.

2. Who should apply for a secured credit card?
Secured credit cards are best for people with poor, limited, or no credit history who want to build or rebuild their credit.

3. Can I upgrade a secured credit card to an unsecured credit card?
Yes. Many banks allow you to upgrade your secured card to an unsecured one after 6–12 months of responsible use and on-time payments.

4. Do secured credit cards build credit?
Yes, secured credit cards report your payment history to major credit bureaus, helping you establish or improve your credit score.

5. Do secured credit cards require a good credit score for approval?
No. Secured credit cards are usually available to people with low or no credit scores since the deposit reduces the lender’s risk.

6. How much deposit is needed for a secured credit card?
Typically, you’ll need a refundable deposit between $200 and $1,000, which becomes your credit limit.

7. Are unsecured credit cards better than secured ones?
Unsecured cards offer more rewards and benefits, but they’re harder to qualify for. Secured cards are better for beginners or those rebuilding credit.

8. Can I get my security deposit back from a secured credit card?
Yes, you’ll get your deposit back when you close the account in good standing or upgrade to an unsecured credit card.

9. Which credit card is easier to get approved for?
Secured credit cards are much easier to get approved for than unsecured ones, especially if you have a limited or poor credit history.

10. Do secured and unsecured credit cards affect credit scores differently?
No. Both types of cards affect your credit score the same way, as long as they report to the major credit bureaus.

11. Can a secured credit card have rewards or cashback?
Some secured cards, like the Discover it Secured, offer cashback rewards, though they’re usually lower than unsecured reward cards.

12. What happens if I don’t pay my secured credit card bill?
The issuer may use your deposit to cover unpaid balances, and missed payments can still hurt your credit score.

13. Can I get an unsecured credit card with bad credit?
It’s possible but rare. Most unsecured credit cards for bad credit have high interest rates and fees, so secured cards are often a better choice.

14. How long should I keep a secured credit card?
You should keep it for at least six months or until you build enough credit to qualify for an unsecured card.

15. Do secured and unsecured credit cards have annual fees?
Some do, depending on the issuer. Many secured and unsecured cards now offer no-annual-fee options.

16. Can students apply for secured credit cards?
Yes. Many secured cards are designed for students and first-time users who are building their credit from scratch.

17. What credit score is needed for an unsecured credit card?
Most unsecured cards require a credit score of at least 670 or higher for approval with good terms.

18. Is the security deposit on a secured credit card refundable?
Yes. The deposit is fully refundable when you close your account or upgrade, provided your balance is paid in full.

19. Do both secured and unsecured credit cards report to credit bureaus?
Yes, reputable issuers report your activity from both card types to all three major credit bureaus.

20. Which card type helps build credit faster?
Both can help build credit if used responsibly, but secured cards are more accessible for beginners starting from zero credit.