Secured vs. Unsecured Credit Cards

Secured vs. Unsecured Credit Cards: Let’s find out – What’s the Difference?

Understanding the differences between using a secured credit card and an unsecured card can help you make the best choice for building or rebuilding your credit. Let’s break down how they work, who should consider each, and how you can build credit with a secured card—and possibly transition to an unsecured card over time.

What Is a Secured Credit Card?

A secured credit card requires that you to make a refundable cash deposit—usually starting at $200—that acts as collateral for your card. Your credit limit is usually setup equal to your deposit. If you miss payments or default, the issuer can use your secured deposit to cover the balance. Otherwise, you’ll get your deposit back when you close the account or are upgraded to an unsecured card.

Key Features of Secured Credit Cards

• Approval is easier: Great for people with no credit or a low score, since your deposit reduces the lender’s risk.

• Deposit required: Amount typically matches your credit line.

• Reports to all bureaus: Use responsibly, and your payment history is reported, helping you build credit with a secured card.

• Refundable deposit: Get your money back with good standing or after upgrading to unsecured.

• Some rewards: A few options (like Discover It® Secured Card) offer cashback perks even for secured users.

What Is an Unsecured Credit Card?

An unsecured credit card is typically what people consider a standard or traditional credit card. No deposit is required. Approval is based on your creditworthiness, income, and other factors. Because the issuer takes on more risk, you need at least fair to good credit to qualify for most cards.

Key Features of Unsecured Credit Cards

• No security deposit: Approval depends on your credit score and history.

• Higher credit limits: Often more purchasing power as you build trust.

• More rewards & perks: Cash back, points, travel benefits, and added protections.

• Greater variety: Students, cash back, travel, balance-transfer, and low-interest cards are widely available.

• Harder approval: Bad or no credit history can make approval difficult.

Secured vs. Unsecured Card: Side-by-Side

How to Build Credit with a Secured Card — and Transition to Unsecured

1. Apply for a secured credit card and make your deposit.

2. Use it responsibly: Make small purchases and pay your bill on time, in full, every month.

3. Monitor your credit: See your progress through free tools and credit bureau reports.

4. Automatic reviews: Many secured card issuers (including Discover It® Secured) start reviewing your account after 7–12 months to see if you qualify for a deposit refund and an upgrade to an unsecured card.

5. Upgrade or move on: After showing good payment behavior, you can graduate to an unsecured card—either with the same company or by applying elsewhere. Your deposit will be refunded, and you’ll enjoy higher limits and better rewards.

Frequently Asked Questions: Secured Credit Cards

Q1. Who should get a secured credit card?

A secured credit card is ideal for people with poor, limited, or no credit history who want a reliable way to build or rebuild credit.

• • If you’re new to credit, have been denied regular cards, or need a guaranteed approval option, a secured card offers a straightforward path.

  • It’s also a smart solution for anyone who needs a “second chance” after past financial missteps, such as missed payments or bankruptcy.

Q2. Can I get a secured card with bad credit?

Yes! Most secured credit cards are specifically designed for individuals who have bad credit or are rebuilding their credit profile.

• • Approval is typically based on your ability to provide the required security deposit, not your credit score.

  • Secured cards remain accessible even after other credit card denials.

Q3. Are secured credit cards safe?

Yes, secured cards are safe as long as you use them responsibly.

• • Your deposit protects the issuer against missed payments, but you are still required to make payments like any credit card.

  • Use the card for small purchases and pay your balance in full and on time each month.

  • Responsible use helps you avoid fees, interest, and develop good credit habits.

Q4. How soon can I upgrade to an unsecured card?

Many issuers will consider you for an upgrade after 6–12 months of on-time payments and responsible use.

• • Track your payment habits, keep your balance low, and stay in good standing with your card provider.

  • Some issuers offer regular account reviews, and you may be eligible for an automatic upgrade or a refund of your security deposit once you establish positive credit behavior.

Q5. Will a secured credit card really improve my credit?

Yes—if the card issuer reports your activity to all three major credit bureaus and you use the card responsibly.

• • Make all payments on time, keep your balance low relative to your credit limit, and use the card regularly for small purchases.

  • Building credit with a secured card is a proven strategy for raising your score and unlocking better financial opportunities over time.

A secured credit card can be the first step towards strong credit. Use it wisely, and you’ll see results! If you have more questions, drop them below and we’ll help you on your credit journey

Have more questions? Drop them below and we’ll help you take the next step in building strong credit!

Final Thoughts

When comparing unsecured vs secured cards, remember: a secured credit card is an effective way to get approved and rebuild your score if you’re starting out or bouncing back. Over time, you can transition from a secured card to an unsecured card, opening the doors to greater rewards, higher limits, and long-term financial opportunity.