Secured vs Non Secured Credit Cards

With the popularity of credit cards nowadays, it may already be a given that you know what they are, what they are used for, and how they may affect the lives of people. However, not all people may be aware that there are different types of cards and that they may fall into two major categories: secured and unsecured.

Both secured and unsecured or non-secured credit cards may be used for the same purpose. However, they also have several differences that distinguish them apart from each other.  

The Big Difference

Both secured and unsecured credit cards can be used for purchases. They may have a rewards program for their customers and both may have rates that you need to pay yearly or monthly. However, they have a remarkable dissimilarity that most people tend to disregard. A secured card is easier to get but there’s a catch. You need to have a savings account, which will secure your line of credit before you can get this card. On the other hand, a non secured credit card does not require you to have a savings account, but is more difficult to acquire because most creditors require that you have at least fair credit rating.

Which to Choose

There are plenty of reasons why you should go for unsecured credit cards. There are also several reasons why a secured type may be the right one for you. To help you select correctly, here are some considerations that you have to think about:

• Annual Fees – Unsecured credit cards typically don’t have an annual fee. Those that charge annual fees typically have better rewards programs and perks that customers can avail of. Meanwhile, almost every secured card has an annual fee. Aside from that, most of them have an application or processing fee. You can even find a secured credit card that charges you a customer service fee.
• Quick Approval – If you want to get a card that has high approval rate and which you can get almost right away, a secured credit card is for you. The application process for this type is simple and usually, all applicants are approved regardless of their credit history. However, to be approved, you should be willing to spend a little cash on the security deposit as well as on other fees.  Unsecured cards, on the other hand, may take some time for applications to get approved. In addition, you may be required to have at least a credit score of 600 to 725 to be approved. Rewards – Years ago, secured cards didn’t offer rewards to the cardholders. Now, there are plenty of these types that offer stunning rebates and even discounts. However, if you really want a card that gives you greater benefits and incentives, an unsecured credit card is what you are looking for.
• Financial Assistance – If you are struggling with debt, it may be best to choose a secured credit card as this will help you to control your urge to buy unimportant things. With this, you will be obliged to live within your means since you will only be able to spend what money you may have in your account.

Making a major financial mistake can affect your life a great deal. A credit misstep will result to bad credit rating, which, in itself, has a lot of negative consequences. To avoid making blunders, it is important that you know which type of card to sign up for. Apart from that, you should also make an assessment on your financial ability before deciding to jump onto the credit card bandwagon. Are you a disciplined spender? Do you have good credit rating? Do you have the capacity to pay your bills on time if you are able to spend more than you originally intended? Knowing the answers to these questions can help you determine which of the major types ofcards available is right for you. It will also help you decide whether getting a card is really right for you.