Secured vs. Unsecured Credit Cards: What’s the Difference?
5 Min Read | Published: April 25, 2025
This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
Learn the key differences between secured vs. unsecured credit cards, how they impact your credit, and which option is best for your financial goals.
At-A-Glance
- Secured credit cards require a refundable deposit and may be used for building or rebuilding credit, while unsecured cards offer more benefits but may require a higher credit score.
- Both types of credit cards report activity to credit bureaus, meaning responsible use may help improve your credit over time.
- Choosing between a secured and unsecured credit card depends on your credit history, financial goals, and ability to meet eligibility requirements.
Whether you’re a college student or recent graduate looking to build credit or someone interested in building credit from scratch as a newcomer to the U.S., you may have heard that credit cards can help. As you begin to explore credit cards, you might find two types: secured and unsecured.
Understanding the differences between them can help you make the most informed financial decision. While secured credit cards may be available to people working to establish or improve their credit scores, knowing how they compare to unsecured cards can help you make the best choice for your financial needs.
What Are Secured and Unsecured Credit Cards?
A secured credit card may be viewed as a building block on the way to qualifying for an unsecured credit card. It requires a refundable security deposit, which acts as the credit limit. The activity of a secured credit card is reported to credit bureaus, which can help establish or rebuild credit if you practice responsible card management and make payments in a timely manner.
If you aren’t able to pay on time, the bank can use your security deposit to cover payments. In time, you may qualify to upgrade your secured credit card to an unsecured card, but how long that takes depends on the card issuer.1
An unsecured, or traditional, credit card is the most common type of card. If you qualify, you receive access to a revolving line of credit up to a certain credit limit. Unsecured cards may offer more benefits to card members than secured cards do, like higher credit limits and the opportunity to earn rewards on purchases.
The table below explores key differences between secured vs. unsecured credit cards.
| Secured Credit Card | Unsecured Credit Card |
|---|---|
| Requires a refundable security deposit | No deposit is required |
| Credit limit is equal to deposit | Credit limit is determined by factors including creditworthiness and income |
| Interest rates may be higher than unsecured cards | Interest rates may be lower than secured cards |
| Unlikely to offer rewards | Depending on the card, rewards may include cash back, points, and miles |
| Limited spending power up to the deposit amount | Increased spending power up to the credit limit, which may be higher based on creditworthiness |
| May be available to applicants with limited or no credit | May require a good to excellent credit score to qualify for certain cards |
Though there are many differences between these types of cards, there is one notable similarity: card activity is reported to credit bureaus for both secured and unsecured credit cards, and can therefore impact your credit history and score.
Who Should Use Secured vs. Unsecured Cards?
Borrowers who have little, no, or poor credit history may seek out a secured credit card to help build credit, while someone with an established credit score might instead apply for an unsecured credit card to take advantage of the benefits it offers.
Since both unsecured and secured credit cards require an application, it’s helpful to understand the factors card issuers could use in assessing eligibility.
- Credit History and Credit Score
A credit history that shows a pattern of responsible financial management and a higher credit score may lead to more favorable credit card offers, including cards with lower interest rates or better rewards. Someone with a sparse or non-existent credit history or low credit score may not be eligible for certain unsecured credit cards. - Collateral
If you’re applying for a secured credit card, a card issuer may need to ensure you’re able to pay the security deposit. This deposit acts as collateral if you’re unable to make payments. - Income
Card issuers often want to ensure you can afford to make payments on a new credit card. They may confirm this by asking for information about your income. Higher incomes may be viewed more favorably and increase the availability of credit card options.
Pros and Cons of Secured Cards
There are benefits and risks of secured credit cards that are worth considering before applying for one.
Pros
- May be available to people with a limited credit history
- May help someone build credit over time with responsible use
- May help curb overspending by only allowing purchases up to the deposit limit
- May allow card holders to upgrade to an unsecured credit card in time
Cons
- Require a deposit to qualify
- May have higher fees and interest charges than unsecured cards
- May not offer rewards and benefits like those of unsecured cards
Pros and Cons of Unsecured Cards
Unsecured credit cards have a number of benefits that make them a great choice for eligible borrowers. However, there are also a few downsides to consider.
Pros
- May have higher credit limits than secured cards, increasing spending power
- Many cards offer rewards and perks that can increase the card’s value (Like the Blue Cash Preferred® Card which allows Card Members to earn 6% cash back on groceries and select U.S. streaming subscriptions, among other benefits.)
- Can help build credit history with responsible use
- Do not require a security deposit
Cons
- May require an established credit history and a certain credit score to qualify
- Higher credit limits may offer opportunities for overspending
Frequently Asked Questions
Unsecured credit cards may come with rewards and perks that are not offered to secured credit card holders. Unsecured cards may also have lower fees and interest rates. However, the right credit card for you may vary depending on your financial goals and current financial situation.
Secured credit cards may help build credit over time with responsible use. How long it takes to establish good credit depends on several factors, but typically, it takes at least six months to generate a credit score.
If you have a secured credit card, your card issuer may allow you to switch to an unsecured card after a period of responsible card use. Talk to your card issuer to confirm how long it takes for a secured credit card to become unsecured.2
The Takeaway
The key difference between secured and unsecured credit cards is that secured credit cards require a refundable security deposit and may be available to those with a more limited credit history or lower credit score. However, for borrowers who qualify, opting for an unsecured credit card may provide benefits and perks along with potentially lower interest rates and fees. Starting with a secured card can help you build the credit required to qualify for a more rewarding, unsecured credit card in the future.
1,2 “How to Upgrade a Secured Credit Card to an Unsecured Card,” Experian
Brooke Joly is a writer on a mission to unravel the mysteries of personal finance and make them accessible to the everyday reader. When she’s not behind the keyboard, you can find her enjoying the outdoors in Charleston, SC.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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