Secured cards vs. unsecured cards: What’s the difference?

These two cards work similarly, but serve different purposes.

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Whether you decide on an unsecured or a secured credit card depends on your personal financial needs. Those with relatively healthy credit might want an unsecured card for perks such as a cash back or travel credits. Those with poor or no credit, however, might consider a secured card. Secured cards are meant to help you build your credit so that you can eventually graduate to an unsecured credit card, making them great for students, new immigrants and those who have a history of poor credit. Here’s a breakdown of how these two cards differ and which one you might want to consider.

What is a secured credit card?

When you open a secured credit card, you must provide your lender with a security deposit — typically $200 to $500, though lower deposits are available. This deposit acts as collateral in case you fall behind on your payments. The amount of your security deposit is also your credit limit.

A secured credit card offers the opportunity to build your credit score. If you consistently make your card payments on time, you’ll see a gradual increase in your score and, eventually, you can graduate to an unsecured credit card. Just make sure your card provider reports your payments to all three major credit bureaus.

Why do card providers require collateral?

You may be new to credit or have a damaged credit score. In these cases, lenders tend to view you as a riskier borrower. Collateral guarantees the provider will be repaid, making them more willing to lend.

Pros and cons of secured credit cards

  • Get one even if you have new or damaged credit.
  • You set your credit limit.
  • Secured cards can come with low deposit requirements and no annual fee.
  • Rebuild your credit score.
  • You must put down a security deposit.
  • Cards typically come with high interest rates.
  • Credit is limited by your deposit.
  • Cards tend to offer few rewards.

Who are secured cards good for?

Secured credit cards are best for those without a credit score or those who have a poor credit history and want to build credit. For example, if you have fair to poor credit, you’re far less likely to get approval for an unsecured credit card. Other individuals who can benefit from secured credit cards include new immigrants, college students and those with no history of credit.

What is an unsecured credit card?

Secured or unsecured?

When you open an unsecured credit card, you won’t have to put down a security deposit. Instead, you’re borrowing money from your bank. In that sense, each time you use the card, you’re taking out a loan you’re expected to pay back in order to maintain a trustworthy credit history.

Typically, if your provider accepts you as a customer, it means they’ve accessed your credit history and are quite confident you’ll repay your debts. To determine your credit limit, your card provider will gauge your ability to repay. They’ll look at factors such as your income and payment history. Ultimately, the credit limit they offer you is the amount they feel you can borrow responsibly.

The importance of your credit score

Your credit score will determine many aspects of your financial future such as applying for credit cards, personal loans and your ability to take out a mortgage for a home.

If you have a good to an excellent credit score of 680 or higher, you’re typically better off applying for an unsecured card so you can go without putting down a security deposit — you’ll likely get better interest rates too.

If you have fair credit — generally 620 to 679 — you may still qualify for an unsecured card. But the ones you qualify for will likely come with higher fees, shadier terms and less favorable interest rates. Compare credit cards for fair credit, or you might be better off getting an excellent secured card, building or rebuilding your credit score and then moving on to a reputable unsecured card.

How can I learn what my credit score is?

If you haven’t yet requested your credit report from Experian, Equifax or TransUnion this year, you are entitled to a free copy of your credit report annually — this will include your credit score along with your credit history.

Other options include submitting a request to a score service or reporting company directly. Some services require that you sign up for a monthly subscription service, while others require a one-time fee.

Requesting your credit score from a third party service will require a soft pull, this inquiry may appear on your credit report but it will have little to no effect on your score.

Pros and cons of unsecured credit cards

  • No security deposit required.
  • Better rewards than secured credit cards.
  • Cards typically come with lower interest rates than secured credit cards.
  • Poor terms if you have weak credit.
  • Can severely damage your credit history if you’re not managing the account responsibly.

Who are unsecured cards good for?

Unsecured cards are the “standard” pick for most consumers and offer the standard array of credit card benefits, including balance transfer opportunities, reward programs and the ability to carry a balance. Of course, you’ll still want to use your unsecured card responsibly, just the same as an unsecured credit card.

Our pick for a secured credit card

Citi® Secured Mastercard®

  • The Citi® Secured Mastercard® is a no annual fee credit card that helps you build your credit when used responsibly.
  • Unlike a debit card, it helps build your credit history with monthly reporting to all 3 major credit bureaus. Once available, you will also have free access to your FICO score online.
  • Use your card anywhere Mastercard® is accepted — worldwide.
  • A security deposit is required. Once approved, your credit limit will be equal to your security deposit (minimum of $200).
  • Get help staying on track with Auto Pay and account alerts.
  • With Flexible Payment Due Dates, you can choose any available due date in the beginning, middle or end of the month.
  • Manage your account 24/7 online, by phone, or in our mobile app.
  • The standard variable APR for Citi Flex Plan is 23.99%. Citi Flex Plan offers are made available at Citi’s discretion.
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Compare secured credit cards

Name Product Filter values Minimum deposit required Purchase APR Annual fee Recommended minimum credit score
Citi® Secured Mastercard®
Starting at $200
23.99% variable
A no annual fee secured card for people who are new to credit or have limited credit history with a fair to average credit score.
OpenSky® Secured Visa® Credit Card
Starting at $200
18.89% variable
A secured Visa® credit card that helps you build your credit quickly.
Applied Bank® Secured Visa® Gold Preferred® Credit Card
Starting at $200
9.99% fixed
This secured card can help you rebuild your credit with an initial deposit of $200 to $1,000.
CardMatch™ from
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See issuer's website
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Can't decide on a card? Get personalized credit card offers with CardMatch™.
First Progress Platinum Elite MasterCard® Secured Credit Card
Starting at $200
19.99% variable
Build your credit with all three major credit bureaus.

Compare up to 4 providers

Funding your secured credit card

Bottom line

If you have the means to obtain an unsecured credit card, that should be your first pick when it comes time to apply. However, if you don’t have credit or have a poor credit history, compare secured credit card options to find a card that can help you build credit for the future. Spend responsibly and pay off your balance on time and you’ll soon be able to graduate to an unsecured credit card.

Common questions about secured and unsecured cards

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