Secured Credit Cards Vs Unsecured Credit Cards: Key Differences

Credit cards are powerful financial tools, but choosing the right type can be overwhelming, especially when you're new to credit or looking to rebuild it. This is where secured credit cards come into play—they’re specifically designed to help individuals establish or improve their credit history. On the other hand, unsecured credit cards are more common and cater to individuals with good credit scores.

Let’s explore what makes secured credit and unsecured credit cards unique and who they are ideal for.

Secured credit cards require collateral, often in the form of a Fixed Deposit (FD). These cards are backed by a deposit, making them an excellent option for individuals with no or low credit scores to build their credit history.

• Ideal for: Individuals with no or low credit history.

• Credit Limit: Generally linked to the FD amount, ranging from 70-100% of the deposit.

• Interest Earned: You earn interest on the FD while using the card.

Wondering what’s unsecured credit card and how it differs from secured cards? Unsecured credit cards don’t require collateral and are designed for individuals with good credit scores, offering higher credit limits and greater flexibility.

• Ideal for: Individuals with a good credit score (typically 750 or above).

• Credit Limit: Determined by factors like credit score, income, and other financial metrics.

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• They provide an easier approval process for individuals with limited or poor credit history.

• They help establish and improve credit scores through responsible usage.

• They offer the possibility of increased credit limits over time.

• They don’t require a security deposit, making them more accessible to those with an established credit history.

• If you have a higher credit score, you can access higher credit limits, offering greater spending power.

• They often come with additional perks like cashback, rewards points, travel benefits, and exclusive offers tailored to your spending habits.

The right choice depends on your financial needs and credit history:

• Secured Credit Cards: Best for individuals with low or no credit scores. They offer a chance to build credit and transition to other financial products.

• Unsecured Credit Cards: Ideal for those with good credit scores, as they provide higher credit limits and don’t require deposits.

1. Research and choose a suitable credit card issuer.

2. Download the issuer’s app or visit their website.

3. Provide required details, including PAN and Aadhaar.

4. Open an FD as collateral through the app.

5. Your secured credit card is activated virtually, with a physical card arriving in 5-7 business days.

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1. Compare cards and check eligibility based on your credit score and income.

2. Visit the issuer’s website/app and fill out the application form with required details.

3. Submit necessary documents and wait for verification.

4. Upon approval, start using the virtual card while the physical card is dispatched.

When deciding between a secured credit card vs unsecured credit card, consider your financial goals, credit score, and need for credit-building tools or flexible features. For beginners or those looking to rebuild their credit, secured cards are an excellent starting point. For individuals with an established credit profile, unsecured cards offer greater flexibility and benefits.

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