Secured Credit Cards Types Vs Unsecured Credit Cards Types
Secured credit cards are those which are used by individuals who desire to recreate a poor credit history. Unsecured credit cards are the ones which are held by people who have good/excellent credit scores. Unsecured cards can be issued in the absence of any security whatsoever. Secured cards need a deposit which matches the credit limit of the card and acts as the guarantee. This is the security on which issuers rely on while taking the risk on those who have a poor credit rating. Apart from the security deposit, there are other differences as well between the two forms of credit cards.
• Applicants: Virtually anyone who makes an application for secured credit cards is accepted, irrespective of the credit history, so long these people have the required amount of money for securing the card. Unsecured credit cards applicants are screened on the basis of their credit reports as well as individual incomes. Since the debt does not have a bank account's security, credit card issuers do this to ensure that their money will be paid back. Applicants who are financially sound bring in lower risk of defaulting in payments with regard to unsecured cards.
• Annual fee: Almost all issuers of secured credit cards charge some annual fees. However most issuers of unsecured credit cards do offer complimentary cards to stay in the competitive market. Among the unsecured cards, the annual fees are frequently charged on those accounts which offer airline miles and other rewards.
• Interest rate: Higher rates of interest are charged on secured credit cards, in comparison to unsecured credit cards. This rate may extend up to about 20 percent or so. Secured credit card companies do ask for higher rate of interest for the simple reason that their customers do actually have limited number of choices. Since these people cannot be eligible to apply for unsecured credit cards on account of their poor credit ratings, they agree to pay any amount the issuer of secured credit cards asks for. Unsecured credit card companies do offer competitive rates since most of their customers are in the position to shop around and grab better deals. However issuers of unsecured credit cards do sometimes enhance the interest rates for those customers who go on to make late payments or cross their credit limits.
• Rewards: The owners of secured credit cards generally do not earn reward points for making use of their account. However unsecured credit card holders get airline miles, hotel stay reward points as well as various cash back and discount offers.
• Credit limit: Secured credit cards come with low limits of credit as this is set by the amount which has been deposited originally by the card owner. Majority of the secured credit card customers do not afford making a huge deposit. The credit limit can be anywhere in the range of $300 to $500 as that is what most issuers require for minimum deposit. Unsecured credit cards set up limits to $10,000 or higher. The issuers of unsecured credit cards fix the limit in accordance with the individual's credit score and card usage history, which they periodically revise.
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