What is an Unsecured Credit Card and How Can You Get One?

Woman holding credit card
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What is an Unsecured Credit Card?

An unsecured credit card is a credit card that doesn't require a security deposit to be approved for the credit card or to get credit limit increases. When people use the phrase "credit card," they're typically referring to an unsecured credit card.

Secured Credit Card vs. an Unsecured Credit Card

Unsecured credit cards aren’t hard to find; the vast majority of credit cards on the market are unsecured.

A secured credit card will always have "secured" in the name, which unsecured credit cards are simply called credit cards.

That's not the only major difference between the two types of credit cards.

With an unsecured credit card, the credit card issuer doesn't have a security deposit they can take if you don't pay your credit card balance. Instead, the creditor's options are to take further collection efforts. This includes reporting the delinquent balance to a credit bureau, referring your account to a third-party debt collector, suing you in court, or asking the court for permission to garnish your wages.

Since secured credit cards, by comparison, require a deposit to as collateral for the credit line, the credit card issuer has the right to take the deposit to cover a defaulted balance. A deposit is required with secured credit cards because the applicants are generally considered a credit risk.

 

Most people would choose an unsecured credit card over a secured credit card because that means they don't have to pay a security deposit. And even though you’re paying a security deposit on a secured credit card, you might have to pay an annual fee too without any extra benefits. Unsecured credit cards typically have lower interest rates and offer rewards programs, features that are rare with a secured credit card.

How to Qualify for an Unsecured Credit Card

People with bad credit, no credit, or who’ve recently filed bankruptcy will have the hardest time qualifying for an unsecured credit card. Most creditors see your shaky credit history as a risk that you may not pay back what you borrow on the credit card. A secured credit card is your best bet for getting your credit back on track and qualifying for a better credit card.

If you can't get approved for an unsecured credit card, start with a secured credit card. After using your credit card responsibly for several months, you may be able to convert to an unsecured credit card. If you are, your credit card issuer will refund the security deposit to you. It can take 12 to 18 months to be considered for an unsecured credit card.

You can improve your chances of getting an unsecured credit card by using a secured credit card wisely for at least six months, bringing in enough money, paying off your past due accounts, and reducing your debt.

You may have a relative or friend who is willing to get a joint (unsecured) credit card with you. This will keep you from paying a security deposit and give you a chance to improve your credit score so you can be approved for a credit card on your own.