Know more about unsecured and secured credit cards

Unsecured or secured credit cards? Understand the difference in simple terms and learn which one suits you the best.
Know more about unsecured and secured credit cards
5 min read
05 January 2024

Know the Difference Between Secured and Unsecured Credit Cards

Credit cards have transformed how we make payments and manage our day-to-day finances. There are different types of credit cards — unsecured and secured. Both have its own set of advantages and considerations. Read on to understand the differences between unsecured and secured credit cards.

What are unsecured credit cards?

Unsecured credit cards are the most common type of credit card. They are offered based on your creditworthiness, determined by factors such as your credit score, income, and credit history. These cards do not require collateral, meaning you do not need to put down a security deposit to establish a credit limit.

Advantages of unsecured credit cards

  1. Convenience: Unsecured credit cards offer instant access to credit without upfront deposits, making them a convenient choice for everyday purchases and emergencies.
  2. Building credit history: Responsible use of unsecured credit cards can help you build a positive credit history, leading to better credit scores over time.
  3. Flexibility: These cards often come with rewards programs, cashback offers, and other perks, enhancing your spending experience.

Considerations for unsecured credit cards

  1. Interest rates: Unsecured credit cards typically have higher interest rates, especially for those with lower credit scores. Failing to pay your balance in full each month could lead to accumulating high-interest charges.
  2. Approval criteria: Approval for unsecured credit cards depends on your creditworthiness. Individuals with limited or poor credit history might find it challenging to secure favourable terms.

What are secured credit cards?

Secured credit cards are designed for individuals with limited or damaged credit histories. These cards require a security deposit upfront, usually equal to your credit limit. The deposit acts as collateral, providing a safety net for the card issuer if you default on payments.

Advantages of secured credit cards

  1. Credit building: Secured credit cards are an excellent way to build or rebuild your credit history. Responsible use, including timely payments, demonstrates your ability to manage credit effectively.
  2. Accessible approval: Secured cards are often more accessible to individuals with poor or no credit history, providing a pathway to establish a positive credit profile.
  3. Graduation to unsecured: With responsible use, some secured credit card issuers may offer the opportunity to transition to an unsecured card, refunding your security deposit.

Considerations for secured credit cards

  1. Security deposit: The initial security deposit can tie up funds you might need for other purposes. However, this deposit is refundable when you close the account or transition to an unsecured card.
  2. Limited credit limit: Your credit limit is determined by your security deposit amount, which might be lower than what you desire or need for larger expenses.

Difference between secured credit cards and unsecured credit cards

Understanding the characteristics that differentiate secured and unsecured credit cards is crucial for selecting the right fit. Here's a breakdown in a convenient table format:


Secured credit cards

Unsecured credit cards

Collateral requirement

Requires a cash deposit as collateral, typically equal to the credit limit.

No collateral is needed; approval is based on creditworthiness.

Credit limit determination

Tied to the amount of the security deposit.

Determined by credit history, income, and financial factors.

Risk factor

Lower risk for the issuer due to the collateral.

Higher risk for the issuer, often requiring a good credit score.

Interest rates

May have lower interest rates compared to unsecured cards.

Generally, higher interest rates to compensate for the lack of collateral.


More accessible for individuals with limited or damaged credit.

Accessible to those with a stable credit history and good credit score.

Credit history building

Ideal for building or rebuilding credit; timely payments positively impact credit scores.

Suited for individuals with an established credit history.

Which is better - a secured credit card or unsecured credit card?

Choosing between a secured and unsecured credit card depends on your financial situation. A secured credit card is beneficial for building or repairing credit but requires an upfront deposit. On the other hand, an unsecured credit card, while more accessible, typically demands a good credit score. If you are establishing credit, a secured card may be a prudent start, gradually transitioning to an unsecured card as your creditworthiness improves. Evaluate your current needs and credit standing to determine which option aligns best with your financial goals.

Choosing the right card for you

If you have a strong credit history and income, an unsecured credit card might provide you with more benefits and flexibility. On the other hand, if you are building or rebuilding your credit, a secured credit card can be a valuable stepping stone to improving your financial standing.

Unsecured and secured credit cards serve different purposes in the world of personal finance. Understanding their differences and assessing your own financial needs will guide you towards making a prudent choice that aligns with your journey towards financial stability and credit health.


While care is taken to update the information, products, and services included in or available on our website and related platforms/ websites, there may be inadvertent inaccuracies or typographical errors or delays in updating the information. The material contained in this site, and on associated web pages, is for reference and general information purpose and the details mentioned in the respective product/ service document shall prevail in case of any inconsistency. Subscribers and users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/ service document and applicable terms and conditions. In case any inconsistencies are observed, please click on reach us.

*Terms and conditions apply

Frequently asked questions

What is the difference between unsecured and secured credit cards?

Unsecured credit cards are not backed by collateral and are typically offered to individuals with good credit scores. Secured credit cards require a deposit as collateral and are often used by individuals with poor or limited credit. Secured credit cards may also come with lower credit limits and higher interest rates.

Which is better - secured credit card or unsecured credit card?

The answer depends on the individual's financial situation and credit history. Unsecured credit cards are generally better for individuals with good credit scores who can qualify for higher credit limits and lower interest rates. Secured credit cards are often a better option for individuals with poor or limited credit, as they can help them build credit and improve their credit score. It is important to compare offers and terms from multiple credit card companies before deciding which type of card to apply for.