Most people think that secured and unsecured credit cards are the same. However, they may be thinking of the differences in terms of APR. There are indeed many differences between the two types of cards and you should consider which kind is best for you.
Secured credit cards require a collateral and it is the bank that will take the risk of your creditors not paying you back if you cannot pay them on time. With these types of cards, it is often easier to get approved since the credit company does not have to approve you for the card. They are only required to settle if you can not pay them.
The main advantages of secured credit cards is that the interest rate is usually lower than an unsecured card. It is also easier to get approved for these cards because there is less risk to the bank. If you can not pay the monthly payments and are late with your payments, the bank can turn you over to your creditors who could sue you.
In some cases, you can be sued even when the card is in your name. However, this is possible when the credit company believes you owe the bank money. You can go to the court and present a “definite and convincing” reason for not being able to pay the credit card bill. If you don’t show your current income and assets, it is hard to prove to the court that you cannot pay.
Secured credit cards also require a higher deposit to open the account. In some cases, this deposit can be as much as one-third of the credit limit. Even though this might seem like a lot of money to put down, you can use it to help build your credit.
A secured credit card is a good option for some people who do not have an extensive credit history. The problem with these cards is that they charge higher interest rates than unsecured credit cards. You can have an account with a very low credit limit, but at a high rate of interest. That is because you are taking the risk that you will pay off the amount you borrowed.
Unsecured credit cards work the opposite way. The only risk the bank takes is if you don’t pay your bills. Since there is no collateral involved, you will be able to get approved for credit cards with very low limits.
If you are interested in these types of cards, you should know about the difference between secured and unsecured loans. With an unsecured loan, you must prove that you are financially capable of paying the loan back. With a secured loan, you are going to need collateral in order to get approved.
If you are looking for a secured credit card, you should consider getting a secured personal loan. You can use your home as collateral if you have a mortgage. Then you will be able to get lower interest rates and higher credit limits because you are deemed to be a low risk.
If you have a poor credit history, it is better to look for a secured credit card that will take out a lower interest rate and offer you a bigger credit limit. However, you will probably have to pay a higher interest rate on that card. It is still better than having to try to qualify for an unsecured loan.
If you really need a credit card, then you should look for one that is offered with an unsecured loan. Usually, the interest rate is lower, since the bank has no risk in the loan. You should also have a lower credit limit, since you are not risking losing your house.
A secured or unsecured credit card is not the same thing as a credit card. You should remember that fact when shopping for cards.