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

Woman holding credit card
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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 your credit limit increased, once approved. When people use the term credit card, what they are really referring to is an unsecured credit card.

Unsecured Credit Cards

Unsecured credit cards aren’t hard to find. As a matter of fact, the vast majority of credit cards on the market today are unsecured. In order to tell the difference, any secured credit card will always have the word "secured" in the name. That said, 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.

Secured Credit Cards

On the other hand, because secured credit cards require a deposit as collateral against the credit line offered, the credit card issuer has the right to take the deposit to cover the debt incurred on a defaulted balance. It's common sense that the deposit was initially required because the applicants are generally considered a credit risk. And, even though you’re paying a security deposit on a secured credit card, you might have to pay an annual fee without any extra benefits.

Why People Prefer Unsecured Credit Cards

Despite the potential legal hazard of having an unsecured credit card, most people would choose an unsecured credit card over a secured one because that means they don't have to pay out money in the beginning—money that could be in the bank earning interest. Additionally, unsecured credit cards typically have lower interest rates and offer rewards programs, features that are rare with a secured credit card.

How Do I Qualify for an Unsecured Credit Card?

People with bad credit, no credit, or who have recently filed for 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 be in a position to pay back what you borrow—even if you want to. Therefore, a secured credit card is your best bet for getting your credit back on track and qualifying for a better credit card once you're no longer viewed as a risk. You can improve your chances of getting an unsecured credit card by using the secured credit card wisely for at least six months—which means not overspending.

Also, you should pay off any past due amounts and reduce your balance as much as possible.

After using your credit card responsibly for several months, you may be able to convert to an unsecured credit card. If approved, your credit card issuer will refund the security deposit to you. However, you should be aware, it can take 12 to 18 months to be considered for an unsecured credit card.

Another option is getting a relative or friend to get a joint (unsecured) credit card with you. This will keep you from paying a security deposit and it gives you a chance to improve your credit score so you can be approved for a credit card on your own.