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What is the Difference Between Secured and Unsecured Credit Cards?

a woman checks her secured credit card balance through online banking

There’s a wide array of credit cards to choose from. Some with preapproval or special rewards programs, and others intended for businesses. Adding to the mix of things, there are two primary types of credit cards: unsecured and secured.

Put briefly, unsecured credit cards are what you typically think about when you hear the phrase “credit card.” That’s likely because most cards are unsecured. Meanwhile, secured credit cards have their own special purpose: to build credit in a safe way, which is why they are frequently called “credit builders.”

Both types of credit cards enable users to make purchases wherever the brand is accepted. And it's essential for cardholders to consistently make timely payments each month. But how are secured and unsecured credit cards different? Keep reading to find out!

If you want to brush up on the nitty gritty details of secured credit cards, revisit our previous blog, What is a Secured Credit Card and How Does it Work? Now let’s discuss the key differences between secured and unsecured cards:

1. Availability & Qualifications

  • Secured Credit Card: Mainly designed for people without an established credit history or looking to rebuild their credit. It is the most accessible option for individuals who’ve had trouble getting an unsecured card in the past.
  • Unsecured Credit Card: It is harder to qualify for an unsecured credit card because it’s typically only available to individuals with good to excellent credit scores.

2. Collateral Requirement

  • Secured Credit Card: Will require an upfront cash deposit as collateral. This deposit protects the issuer if the cardholder fails to make payments.
  • Unsecured Credit Card: No collateral needed. Approval is based solely on the cardholder’s creditworthiness, including credit history, income, and other factors.

3. Benefits & Perks

  • Secured Credit Card: While it doesn’t have the bells and whistles of an unsecured card, a secured credit card can be a useful tool for building or rebuilding credit. Responsible use of credit (paying your bills on time, keeping credit card balances low, and paying off your credit card bill in full each month) will positively impact your credit score.
  • Unsecured Credit Card: Your usage not only impacts your credit history and score, but it also opens doors to additional benefits and rewards for your responsible management. This may include cash back rewards, travel rewards, or other perks.

4. Credit Limit

  • Secured Credit Card: While both types of cards have credit limits, the criteria and maximum limits have differences. Plus, secured credit cards require a security deposit. The credit limit for a secured card is determined by the amount of cash put down for the deposit. Most secured credit cards have maximum credit limits of a few thousand dollars.
  • Unsecured Credit Card: These cards typically have much higher credit limits, which can fluctuate based on the applicant’s creditworthiness and additional factors. Having a higher credit limit provides more financial flexibility.

5. Risk for the Issuer

  • Secured Credit Card: Will carry lower risk for the lender due to the collateral from the upfront cash deposit. This means the lender can reimburse themselves if the cardholder defaults on what they owe.
  • Unsecured Credit Card: Because cash deposits aren’t required, there is nothing guaranteeing or “securing” a cardholder’s ability to pay their balance. Therefore, the lender carries a higher risk.

6. Fees & Interest Rates

  • Secured Credit Card: Has higher fees and interest rates compared to unsecured cards. That’s because these cards are designed for individuals who are new to credit or have a poor credit history.
  • Unsecured Credit Card: Offers lower annual fees and interest rates, especially for individuals with good credit scores.

Secured & Unsecured Credit Cards at Academy Bank

While secured and unsecured cards have their unique differences, the ultimate goal remains the same: improving your financial standing. Whether you're just starting your credit journey or have been managing it for some time, Academy Bank is here to support you. Explore our range of credit cards and take strides towards achieving your financial goals.


Member FDIC

All Academy Bank credit cards are Subject to credit approval. Transaction and Penalty fees apply.

For the Unsecured Credit Card, the Annual Percentage Rate (APR) is based on credit history.

For the Credit Builder Secured Credit Card, a Credit Builder Savings account required. $5.00 quarterly fee will be charged to the Credit Builder Savings account if not enrolled in eStatements. Once added, funds cannot be withdrawn from the Credit Builder Savings account and the Credit Builder credit card without closing the savings account and the credit card.

Improved credit score is not guaranteed. Credit score is determined by credit reporting agencies based on multiple factors, but satisfactory performance on a credit card product can improve your credit score. Default on a credit card, including missed or late payments can damage your credit score.