If you're new to credit or have a limited credit history, you'll encounter two categories of credit cards: secured and unsecured. Understanding the difference helps you choose the right product for your situation and avoid wasted applications.
Secured vs. Unsecured Credit Cards
Compare key features side by side to understand which card type fits your situation.
| Feature | Secured Credit Card | Unsecured Credit Card |
|---|---|---|
| Security deposit | Generally required; the deposit is held by the issuer as collateral and is typically refundable. Deposit amounts vary by issuer. | Generally not required. No collateral is held by the issuer. |
| Eligibility and credit history | May be available to applicants with limited or poor credit history. Approval is not guaranteed and eligibility varies by issuer. | Typically requires meeting the issuer’s underwriting criteria, which may include credit history and income. Eligibility varies by issuer and product. |
| Credit limit | Often related to the security deposit amount, but credit limits vary by issuer and may change over time. | Set by the issuer based on underwriting criteria. Limits vary by issuer and may change over time. |
| Credit-building potential | May help build credit if the issuer reports account activity to the major credit bureaus. Reporting practices vary by issuer — confirm before applying. | May help build credit if the issuer reports account activity to the major credit bureaus. Reporting practices vary by issuer. |
| Fees and APR | Fees and APR vary by issuer and product. Some secured cards charge annual fees. Compare all fees and the APR before applying. | Fees and APR vary by issuer and product. Some unsecured cards charge annual fees; others do not. Compare all fees and the APR before applying. |
| Graduation to an unsecured card | Some issuers may offer a path to graduate to an unsecured card, but graduation is not guaranteed. Timing, criteria, and whether the deposit is returned vary by issuer. | Not applicable — the card is already unsecured. |
Terms, fees, eligibility criteria, credit-bureau reporting, and graduation policies vary by issuer and product. This comparison is for general educational purposes only. Verify current terms directly with the issuer before applying.
What Is a Secured Credit Card?
A secured credit card generally requires a refundable security deposit. The deposit often helps determine the credit limit, but deposit requirements and credit limits vary by issuer. The deposit is held by the issuer as collateral.
If you don't pay your bill, the issuer can apply your deposit against the outstanding balance. This protection is why issuers can approve secured cards for people with no or poor credit history.
Secured cards generally work like other credit cards for purchases and billing, but they require a security deposit and may differ in fees, credit limits, rewards, eligibility and graduation policies. Credit reporting varies by issuer. If your goal is to build credit, confirm whether the issuer reports account activity to the major credit bureaus.
What Is an Unsecured Credit Card?
An unsecured credit card generally does not require a security deposit. The issuer evaluates the application using its underwriting criteria, which may include credit history, income and other permitted information.
The vast majority of credit cards are unsecured. When most people say "credit card," they mean an unsecured card.
When to Consider a Secured Card
A secured card may be worth considering if you have little or no credit history, are rebuilding credit, or do not qualify for unsecured cards with acceptable terms. Approval is not guaranteed, and eligibility varies by issuer.
When to Consider an Unsecured Card
An unsecured card may be appropriate if you qualify for one with terms that fit your needs and budget. Eligibility varies by issuer and product.
Graduation: Moving from Secured to Unsecured
Some secured card issuers offer a path to graduate to an unsecured card, but policies vary. Some issuers periodically review eligible accounts for graduation. The timing, criteria and whether the security deposit is returned vary by issuer.
Final Thoughts
Secured cards can be useful for some consumers who are establishing or rebuilding credit, while unsecured cards may be available to consumers who meet an issuer's eligibility standards. Compare fees, APR, deposit requirements, credit reporting and graduation policies before choosing.