What is an unsecured credit card?


Quick Answer

With an unsecured credit card, cardholders aren't required to offer up collateral in the event that they aren't able to pay their cards off, according to NerdWallet. Secured credit cards require that consumers make a deposit before being approved for a credit card and are more popular with those who have bad credit or no credit at all.

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What is an unsecured credit card?
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Full Answer

Examples of unsecured credit cards include retail, low-interest and rewards cards, notes NerdWallet. Common advantages of these cards include rewards, travel bonuses, discounts in select stores and cash back. While a person with bad credit may be able to qualify for an unsecured credit card, he might have to pay high annual fees.

The deposit required for a secured credit card varies and is often as much as the limit on the card, according to NerdWallet. After the consumer makes the required deposit on the secured card, it can be used the same as an unsecured card. The cardholder has to pay interest on the card if he doesn't pay his bill in full every month, just like he would have to with a secured card. When used responsibly, secured cards are a good way for a consumer to improve his credit score and qualify for an unsecured credit card in the future.

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