In an era of credit cards replacing debit cards in our wallets, choosing between secured and unsecured credit cards is crucial to maintaining a financial balance. It would help you choose wisely according to your lifestyle, needs and financial capability.
Both come with their own features and benefits, making it essential to know all about them before choosing an option. If your credit score is low, getting a secured credit card offers a quick and easy solution. Getting an unsecured one requires you to have a positive credit history.
Here’s an overview of secured and unsecured cards, their features, differences and more.
An Overview of Secured Credit Cards
A secured or FD-backed credit card is designed for consumers with poor or no credit history! All you have to do is deposit a certain amount in the bank as collateral and get a credit card on that security amount.
The fixed deposit also acts like your credit limit and allows you to spend up to that amount freely.
Salient Features of FD-Backed Credit Cards
Now that you know what a secured credit card means, here are its features:
- Enjoy Credit Up to a Limit Set by You
To get this type of card, you need to pledge your FD investment with the issuer. Your FD’s value decides your credit limit. In most cases, you can enjoy 100% of this amount and use your card for online and offline purchases.
- Build Your Credit Profile
Initiating credit and building your account takes time and effort. Making timely payments and using your card responsibly will positively impact your credit score and help build your profile for the future.
- Higher Accessibility
Secured cards have higher chances of approval since the default risk for issuers is reduced. They can leverage your FD to recover the dues in case you default. It is accessible to more people like homemakers, students and individuals with poor/average credit history.
An Overview of Unsecured Credit Cards
Unsecured credit cards are more common in the market. The approval and the terms you get for these cards primarily depend on your creditworthiness. For this, issuers assess a number of factors like your credit score, income and employment, as well as your overall financial history.
Salient Features of Unsecured Credit Cards
Here are some of the distinctive features you enjoy when you get the unsecured option:
- No Requirement of Collateral
You do not require any fixed deposit as security to get the card. This way, you do not risk losing your investment in case you fail to pay the dues due to any unforeseen reasons.
- Better Rewards and Offers
Unsecured cards generally come with a variety of benefits. These include higher reward points on transactions, cashback, discounts on shopping and travel benefits, among others.
- Enhanced Credit Limits
Unlike secured cards, the credit limit is not dependent on the value of the collateral that you pledged as security. Instead, it depends on your repayment capacity. The limit can be increased upon demonstration of responsible credit behaviour.
Differences Between Secured and Unsecured Credit Cards
For better understanding, let’s note a few broad differences between secured and unsecured credit cards.
| Parameters | Secured Credit Card | Unsecured Credit Card |
| Collateral | You need to provide collateral as security | You do not need to provide any collateral |
| Minimum Credit Score | Available for score below 670 and no credit history | You need a score of 750 or higher |
| Determination of Credit Limit | The limit depends on the collateral’s value | The limit depends on your creditworthiness |
| Interest Rates | Lower interest rates since the risk for the issuer is lower | Issuers charge higher interest rates to compensate for the risk |
Secured Card Vs Unsecured Cards: Which One Should You Apply for?
Whether a secured or unsecured card is more suitable for you depends on your creditworthiness and spending patterns. A secured card is the best option for building a healthy credit ecosystem in your account and enjoying credit facilities at a minimum cost.
That said, if your credit score is high and you can prove a stable income and employment, getting an unsecured one may be a smart choice. This is because you can get better interest rates by leveraging your creditworthiness. You can also negotiate a higher credit limit.
The One Credit Card provides the option of both a secured credit card and an unsecured credit card. The One Credit Card App helps maintain finances and check credit statements hassle-free.
You can check what is the minimum due on a credit card on the app and pay your balances on time to avoid paying interest later. The application process is entirely online, and you can get instant approval once eligibility criteria are met.
You can earn 5X rewards on your top 2 spend categories and enjoy offers on food, dining, movies, utility bills, and more. Apply now and access credit at your fingertips.
