What is the Difference between Secured Credit card and unsecured Credit card

What is the Difference between Secured Credit card and unsecured Credit card 

In the modern world, credit cards are vital financial instruments since they provide convenience and purchasing power. But not every credit card is created equal. It's possible that you've heard of "secured" and "unsecured" credit cards. These phrases refer to two distinct approaches to managing your money.

We'll talk about secured and unsecured credit cards in this guide. It's important to comprehend these cards whether you have no credit history at all or are trying to rebuild it. To make wise financial judgments, let's explore the world of secured vs. unsecured credit cards.

Comparing Secured and Unsecured Credit Cards: What's Different

Secured Credit Card

With a secured credit card, the cardholder must pay a security deposit that is usually equal to the credit limit of the card. By serving as collateral, this deposit lowers the credit card issuer's risk. For the purpose of establishing or repairing credit, people with short or bad credit histories frequently use secured credit cards. Although they work similarly to conventional credit cards in that they let users make purchases and pay back the borrowed money, the deposited funds reduce the risk to the issuer. Over time, prudent utilization of a secured credit card can contribute to the cardholder's credit score improvement.

Unsecured Credit Card

The common kind of credit card that doesn't need a security deposit is an unsecured credit card. Based on the cardholder's creditworthiness—which is determined by a number of variables including income, credit score, and credit history—these cards are provided. A revolving credit line is made available by unsecured credit cards, and the cardholder must make consistent payments to cover the borrowed amount. For those with strong to excellent credit scores, unsecured credit cards can come with a variety of benefits and rewards, such as cashback, points, or miles.

How Do Secured and Unsecured Credit Cards Differ From One Another?

You may quickly and easily determine the main distinctions between an unsecured and secured credit card by using the following table:

Point of Difference	Secured Credit Card	Unsecured Credit card
Impact on Credit history	To improve your credit mix and repair a bad credit history, you might want to think about getting a secured credit card.	Only those who already have a respectable credit history may apply for this card in order to further enhance their credit records. To minimise the chance of being turned down, check your credit score prior to applying for these cards.
Definition	These documents are issued by banks or other creditors in relation to the applicant's fixed deposit that is held with them.	Unsecured credit cards don't need a collateral deposit, in contrast to secured cards. If you meet the lender's minimal credit score and monthly income restrictions, you are eligible for these cards.
Revenue	To obtain secured credit cards, documentation of a steady source of income is not required.	These cards are only issued once the issuer is satisfied that you have a reliable source of income and can pay back the debt with ease.
Credit Score	Applicants for secured credit cards are not hindered by low or nonexistent credit scores.	When applying for an unsecured credit card, banks and non-bank financial institutions often require a minimum CIBIL score of 750.
Credit Limit	It is imperative that when applying for a secured credit card, you guarantee a larger sum for your fixed deposit. This is due to the fact that the lender only permits you to use a credit limit of 75% to 85% of the amount of your FD.	When you make a good living and the lender sees that your credit report is spotless, you can obtain an outstanding credit limit.
Attached	To obtain a secured credit card, collateral must be registered. Financing institutions typically take FDs into account for this reason.	Obtaining an unsecured loan does not require collateral.
Offers and Advantages	You can benefit from two distinct advantages with secured credit cards at the same time. You keep taking advantage of all the related deals and advantages as long as you use your credit card. Additionally, the FD interests begin to accrue on a monthly, quarterly, half-yearly, or annual basis.	When you use an unsecured credit card month after month, you are not eligible to receive extra interest. Essentially, the only benefits you receive are customized discounts and reward points linked to every transaction.
Function of a Positive Credit Report	The best credit cards for improving bad credit reports are secured ones.	Bad credit reports are ineligible for unsecured credit cards since they are viewed as extremely dangerous by lenders.
Fees	The maintenance fees for secured credit cards are extremely low, sometimes even nonexistent.	A set amount is charged annually for maintenance on unsecured credit cards. Nevertheless, if you spend more than a specific amount—determined by the individual credit card company—you can waive it.
Documentation	If you choose this option, you will need very minimal documentation. As the holder of a fixed deposit account, the credit card issuing company will already have your information, so you won't need to submit any further paperwork.	In this instance, the documentation procedure is a little complex. Furthermore, because the lender must compare your eligibility to an application submitted for a specific loan instrument, the verification process may take some time.
Significance	People with modest incomes on a monthly basis or those with poor credit histories may want to apply for a secured credit card.	Anyone with a good credit history and a consistent monthly income is eligible for an unsecured credit card.

After looking over the aforementioned chart, you will be better prepared to decide whether to use an unsecured or secured credit card. Let's now discuss each application's specific steps so you may at last begin improving your creditworthiness. 

How Can You Apply for a Secured Credit Card ?

• Research and Comparison: To begin, examine and contrast the various secured credit card solutions on the market. Examine elements like credit limit, annual fees, and interest rates.

• Verify Your Eligibility: Make sure you fulfill the requirements by going over each card's eligibility criteria. A minimum age, a certain income threshold, and the requirement to keep a Fixed Deposit (FD) with the loan provider are a few examples of criteria.

• Pick a Card: Based on your needs and financial circumstances, pick the secured credit card that best fits your demands.

• Visit Lender's Website: If you want to apply for a secured credit card, go to the lender's official website.

• Complete the application: Find the secured credit card application on the lender's website. Give your full name, address, phone number, and estimated monthly/yearly income.

• Deposit Requirement: You will be required to use your debit card information to make a security deposit if you do not currently have an FD with the credit provider. The deposit serves as security for the card.

• Approval: The secured credit card will be issued to you upon approval of your cash deposit. Your credit limit will usually be 85% of the amount deposited.

How Can You Apply for an Unsecured Credit Card ?

• Comparison: To start, make a comparative analysis of the many unsecured credit card possibilities on the market. Consider elements such as credit limits, yearly fees, rewards programs, and interest rates.

• Check Your Eligibility: Go over each unsecured card's conditions. These could contain information about employment, income level, and minimum credit score.

• Pick a Card: Decide which unsecured credit card best suits your credit history and financial objectives.

• Review of Credit Report: Your credit history is a major consideration for unsecured card lenders. Ascertain that your credit reports are current and accurate.

• Prepare Documentation: Compile the required paperwork, which frequently consists of paystubs, bank statements, and employment verification. Having these files at hand will help the application process go more quickly.

• Apply Online: Locate the online application form by going to the credit card issuer's official website.

• Finalized Application: Provide accurate information on the application form, including your financial, job, and personal facts.

• Application Submission: After your application is finished, submit it online.

• Evaluation and Approval: Your application and creditworthiness will be examined by the credit card issuer. You will be given your unsecured credit card if you are authorized.

Conclusion

You'll be prepared to choose wisely when thinking about your next credit card once you've carefully examined secured and unsecured credit cards and have a firm grasp of their features. Furthermore, you now know that choosing a credit card backed by your fixed deposit has two benefits. As such, you should exercise caution and choose the credit card that best suits your needs in terms of credit limit and urgency.