Difference Between Secured & Unsecured Credit Card

Choosing the right credit card with these many options available is difficult. When you’re deciding between secured and unsecured options. They may look identical but they are completely different. 

Continue reading to learn about the key differences between secured and unsecured credit cards. 

Difference Between Secured & Unsecured Credit Card?

Meaning of Secured Credit Card 

A secured credit card is a secured card as the name implies and is protected by a security same as a secured loan.

Some banks offer these cards against fixed deposits and are also known as credit cards against FD.

In such cases, FDs work as the collateral for the credit card.

The issuer determines the credit limit on these cards based on the amount in the fixed deposit so as bigger is the deposit amount the higher is the credit limit. 

How Does It Work? 

Secured credit cards work in the same way as the traditional credit cards but there are some limitations to it in terms of credit limit and other benefits.

Secured credit cards mostly offer a credit limit of 75%-85% of the FD amount which means if you have a fd of 1 lakh you can receive a credit limit of 750000- 850000.

Credit limit is based on the FD amount which means as bigger is deposit amount, the higher is the credit limit.

Credit card issuer can use FD amount to pay-off the debt in case of secured credit card against FD. 

ALSO READ: Check the best credit card against fixed deposits in 2025

Features of Secured Credit Card: 

Now, you know what is secured credit card. Let's check features offered by these credit card, some of them are mentioned below-

Determining Credit Limit: 

The credit limit is determined based on the security deposit kept as collateral which can range from a few hundreds to thousands. 

100% Credit Limit: 

The credit limit on the secured credit card is equal to the amount of the deposit which can be 100% secured credit limit.

Building credit score these secured credit cards are helpful in building credit score without any risk. 

Positive Impact: 

Secured credit cards have a good effect on the borrower's credit history. Using these cards responsibly helps in improving credit score by making timely payments. 

Higher Approval Rates: 

These Secured credit cards have higher approval rates which makes them available for people with lower credit scores. 

Credit History Flexibility: 

Secured credit cards do not issue based on credit history so anyone can avail it despite having any previous financial difficulty. 

Limited Reward & Benefits: 

Secured cards offer credit building than any other perks which results in lesser rewards and bonuses. 

Gradual Transition: 

Secured credit builds credit scores as gradually it improves you can transit to an unsecured card that offers more rewards and benefits. 

Meaning of Unsecured Credit Card 

An unsecured credit card is unsecured as the name implies and is issued without keeping any security against it.

Banks issue unsecured credit cards based on the borrower's credit history.

The main eligibility criteria is to have a good credit history to get this card.

These cards offer extra rewards which include cashback, incentives, discounts, travel benefits, etc. 

How Does It Work? 

Unsecured credit cards as the name suggests is unsecured and doesn’t come with security collateral which the lender keeps in case of failure of payments.

These cards are riskier for lenders and the terms are determined by borrowers credit ratings, ability to pay and other information. 

ALSO READ: Check smart strategies to manage credit card debt

Features Of Unsecured Credit Card:

Now as you know what is unsecured credit card. Let's check features offered by these credit card, some of them are mentioned below-

No Need of Security Deposit:

An unsecured credit card does not need any sort of security as these are unsecured. The credit limit on these cards is decided by the card issuer based on the borrower's credit history. 

Variable Credit Limits: 

These cards offer a higher credit limit which is determined by the credit card issuer based on borrowers credit history. 

Broader Rewards and incentives: 

Unsecured cards offer rewards, cashback, travel benefits, discounts, etc. which is offered to people with good credit scores. 

Credit Score Impact: 

Using these cards responsibly improves the credit score whereas late payments and balances can have a negative impact on the credit score.

Conclusion

Understanding about secured and unsecured credit cards is important when applying for a credit card.

Deciding which card to choose solely depends on the credit history. If you have a bad credit score or want to build a credit score you can choose a secured credit card.

If in case you have a good credit score, then an unsecured credit card is perfect for you. Compare different credit cards before applying for any one that best suits you.