What’s the difference between secured and unsecured credit cards?

Written by

Seychelle Thomas,

Edited by

Brooklyn Lowery,

Reviewed by

Stephanie Zito,

Expert verified

Published on December 11, 2024 | 4 min read

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Key takeaways

A secured credit card is a type of credit card that requires a cash deposit as collateral. This deposit amount is usually equal to the credit limit you’ll receive.
Most credit cards are unsecured credit cards, which means you won’t have to put down a deposit as collateral. Unsecured credit cards tend to come with better perks and rewards, lower fees and lower interest rates.
Secured credit cards are usually for people with poor credit or no credit history, whereas unsecured credit cards are usually for people with good credit or better.

Finding a credit card issuer who will approve you for one of its products can feel impossible when your credit score is in the fair or bad range (669 and below) or you don’t have an established credit history. Fortunately, there’s a type of credit card that almost anyone may be able to qualify for: a secured credit card. With a secured credit card, consumers with fair to bad credit or no credit history have the opportunity to build a positive credit history and prove their creditworthiness over time.

But there are notable differences between secured and unsecured cards, and it’s important to understand the details before making a decision for yourself.

Secured vs. unsecured credit cards

A secured credit card is a type of credit card that requires a cash deposit as collateral. This deposit is normally close to or the same as the credit limit you’ll receive. For example, if you apply for a secured credit card and put down a $200 deposit as collateral, you’ll typically qualify for a $200 line of credit as a result. This type of credit card is typically for people who are looking to build or rebuild their credit.

Most credit cards are unsecured, which don’t require a security deposit as collateral. Unsecured credit cards tend to come with better perks and rewards, lower fees and lower interest rates. Generally speaking, unsecured credit cards are a better deal for consumers. However, people with poor credit might not qualify for an unsecured card.

The following chart explains some of the key differences between secured and unsecured credit cards:

Card terms and features	Unsecured credit cards	Secured credit cards
Deposit required?	No	Yes
Minimum recommended credit score to qualify	Usually 670 or higher (though there are usecured cards for people with poor credit)	Usually available for no credit history or scores below 669
Average APR	Usually over 20 percent	APRs tend to be higher for secured credit cards
Annual fee charged?	Sometimes	Sometimes
Helps you build credit by reporting to credit bureaus	Yes	Yes
Rewards available?	Yes, with many credit cards	Sometimes

Applying for a secured card vs. unsecured card

Applying for a secured credit card is the same as applying for an unsecured credit card. You’ll start by comparing secured credit cards to find one that offers the benefits you want, confirm that you qualify and then start an application.

In your secured credit card application, you’ll provide your name, birthdate, address, Social Security number, employment information and income. Most secured credit cards will require you to pay your security deposit when you apply, which you can usually pay for with a debit card or a bank account. If your application for a secured credit card is denied, the cash deposit you put down will be returned to you, usually within a few business days.

Building credit with a secured card vs. unsecured card

When it comes to building your credit score, the process is the same with secured and unsecured credit cards. Both types of cards report your activity to the three main credit bureaus — Experian, Equifax and TransUnion. The bureaus collect information about your balances and credit card payments and use it to build a history of credit usage in your name.

If your goal is building credit and keeping your score in the best shape possible, you should strive to pay your bill in full and on time each month and keep your credit utilization rate below 30 percent.

Upgrading from a secured card to an unsecured card

If you have had a secured card for a while, handled it responsibly and have improved your credit score as a result, you may wonder if it’s time to upgrade to an unsecured credit card. You’ll typically have three options:

Ask your card issuer to transfer your secured line of credit to an unsecured card.
Wait for your issuer to automatically upgrade you to an unsecured card if you’ve been a responsible cardholder. This may take about 12 to 18 months.
Simply apply for a new credit card and close your secured credit card account. Note that, when you close an old secured credit card account in good standing, you’ll get your full deposit back.

It may seem easier to just apply for a new unsecured credit card once your credit score is in an acceptable range. This option lets you choose the right credit card for your needs, whether you want to earn cash back or receive other card benefits. But keep in mind that it’s a good idea to keep your oldest card open long-term, even if you only rarely use it in the future. That’s because your length of credit history also impacts your credit score. If possible, ask your secured card issuer to convert you to an unsecured card so you can get your deposit back and maintain your credit history.

Then, if you’re ready for an all-new card, too, consider one of Bankrate’s best credit cards.

The bottom line

So, should you get a secured card or an unsecured card? The answer generally depends on your credit score and credit history. If you’re in the market for a secured credit card because you’re new to credit or you have a bad credit history, make sure you take the time to compare all the top secured credit card offers to find one that fits your needs, preferably one with the best benefits and lowest fees.