What’s the difference between secured and unsecured credit cards?

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Key takeaways

Secured and unsecured cards essentially work the same. Both let you buy on credit and impact your score. The difference is one requires a refundable security deposit and the other does not.
Secured cards are a good way to establish your improve your score before moving on to unsecured cards with additional perks and higher limits.
Timely payments and a low utilization ratio positively impact your score and demonstrate financial reliability to lenders.

The difference between secured and unsecured credit cards is simple; one requires a cash deposit and the other does not. Why would anyone want to pay a deposit? Because it gives you access to credit that otherwise is impossible.

Many issuers will not approve applicants with scores below 670. If you have a poor or fair score you’ll have trouble qualifying for cards, especially for ones that don’t charge hefty fees. Your best bet is a secured card.

Let’s go over the benefits each type of card offers so you can choose if a secured or unsecured credit card is for you.

How secured credit cards work?

What is a secured credit card vs an unsecured one? Secured cards require a cash deposit that serves as collateral. This deposit reduces the risk to the issuer making secured ones easier to get. Typically the deposit sets the credit limit. So if you put down a $500 deposit you’ll have a $500 limit. Most issuers set minimum deposits at $200 and maximums at $3,000 but you can find exceptions.

Even though you put down a deposit, you do have to pay your bill each month. If you fail to pay your bill, the issuer will keep money from your deposit to offset what you owe and may charge a late fee. You will get your deposit back when you close your account in good standing meaning all your bills are paid.

Secured cards are a good way to improve your score and often have lower interest rates and fewer fees than unsecured cards for bad credit. Moreover, most secured cards offer the possibility of transitioning to an unsecured one after a period of consistent, timely payments, further incentivizing good financial behavior.

Examples of secured credit cards

Financial institutions know that consumers need help improving their scores so there are plenty of secured cards to choose from. Our favorites have low fees and low minimum security deposits.

Don’t see a card you like?

Check out $500 limit credit cards for even more choices!

How To Apply for a Secured Credit Card

Applying for a secured card is a straightforward process and much like applying for a regular card. Here’s a step-by-step guide:

Research and compare options: Start by researching different secured cards to find one that best suits your needs. Look for cards with low annual fees, reasonable interest rates, and a straightforward path to upgrading to an unsecured card.
Check your eligibility: Ensure you meet any eligibility requirements, such as being at least 18 years old and having a valid Social Security number or Individual Taxpayer Identification Number (ITIN).
Prepare your deposit: Most secured cards require a security deposit that acts as your limit. Determine the amount you can afford to deposit. This deposit is typically refundable and will be held by the issuer as collateral.
Complete the application: Fill out the application form provided by the card issuer. This can usually be done online. You’ll need to provide personal information, including your name, address, income, and employment details.
Submit your deposit: Once your application is approved, you’ll be required to submit your security deposit. This is often done through a bank transfer or by providing a check.
Wait for approval and card issuance: After submitting your deposit, the issuer will process your application. Upon approval, you’ll receive your secured card in the mail, typically within 7-10 business days.
Use responsibly: Use your secured card responsibly by making on-time payments and keeping your balance low. This will help you build a positive payment history and potentially qualify for an unsecured card in the future.

By following these steps, you can successfully apply for a secured card and start working towards improving your score.

Want an unsecured card for poor credit??

Click here for credit cards with no deposit!

Do I get my deposit back with a secured credit card?

Yes, you typically get your deposit back with a secured card, but certain conditions apply. The security deposit you provide when opening a secured card serves as collateral and sets your limit. This deposit is refundable, provided you manage the card responsibly.

When you get your deposit back:

Card upgrade: Many issuers allow you to upgrade from a secured to an unsecured card after demonstrating responsible financial behavior, such as making timely payments and maintaining a low balance. Upon upgrade, your security deposit is usually refunded.

Account closure: If you decide to close your secured card account, you will receive your deposit back, assuming you have paid off your balance in full and the account is in good standing.

Conditions for refund:

Good standing: Ensure your account is in good standing, with no missed payments or outstanding debt.

Full balance payment: Your entire balance must be paid off before the deposit is refunded.

While the deposit is held, it does not earn interest, and any late payments or defaults can affect the return of your deposit. Proper management of your secured card can help you build a positive payment history and eventually retrieve your security deposit.

What is an unsecured credit card?

Traditional credit cards are unsecured meaning they don’t require a security deposit. These cards are more common and often come with rewards and perks. Consumers normally have to have a score of 670 or higher to qualify. The limit varies but is typically determined by the issuer based on the cardholder’s creditworthiness and income.

Not all unsecured cards are out of reach for consumers with poor credit. Subprime cards have lenient requirements making them easy to qualify for but they also tend to have low limits, high interest rates, and additional fees. The additional fees help protect the issuer in case consumers default – fails to pay their bill.

Here at MoneyFor, we can help you understand your score and learn how to raise it.

How to apply for an unsecured credit card

Applying for an unsecured card is straightforward. First do your research and compare cards so you find one with benefits you want and fees you can afford. Next, confirm that you qualify – check your score and prequalify – then apply.

You can typically apply online. The issuer will ask for your name, date of birth, Social Security number, address, email, phone, employment details, and income. Some may also inquire about monthly housing costs and other financial obligations.

After submitting your application, the issuer will perform a hard inquiry. This will cause your score to dip – it should bounce back in a few months to a year. If approved, the issuer will mail your card. Many give you your number right away so you can begin using it instantly.

Credit cards for poor credit no deposit!

Apply and get a $500 limit credit card today!

Examples of unsecured credit cards

Our choices for unsecured cards include ones that offer cash back rewards and emphasize score repair.

Secured credit cards vs. unsecured credit cards

The following chart explains the biggest differences between secured vs unsecured credit cards.

	Unsecured Cards	Secured Cards
Average APR	24.9% – 34.49%	0% – 30.49%
Minimum Recommended Credit Score	Usually 670 or higher	No credit history or scores below 669
Annual Fee	$0 – $99	Typically not
Deposit Required	No	Yes
Helps Build Credit	Yes	Yes
Rewards	Yes with many but not all	Sometimes

The choice between a secured vs unsecured credit card ultimately depends on one’s score and financial situation.

Find unsecured credit cards with $1000 limit!

How can credit cards help your credit?

Credit cards help your score because when you use them you are essentially borrowing money. Swipe your card and the issuer pays the merchant directly for the purchase. No money comes out of your bank account.

At the end of the billing cycle, the issuer will send you a bill for your purchases. You only have to pay the minimum – typically 2% of the total balance or $25, whichever is more. When you pay your bill on time you demonstrate that you are reliable and can be trusted to repay what you owe.

Your score is a digital representation of your creditworthiness or how much you can be trusted to repay money you borrow. When you buy with credit – doesn’t matter if it’s a secured credit card or unsecured – and pay your bill on time, you show that you’re responsible and reliable.

Build or rebuild your credit

The choice between a secured or unsecured credit card for rebuilding credit hinges on your current financial situation and how poor your score is. Secured cards are easier to qualify for but require a security deposit. Unsecured ones are harder to qualify for and many come with fees. Either way, both can help boost your score and follow the same rules:

Pay bills on time
Keep your utilization below 30%
Apply for new accounts sparingly
Maintain a mix of cards and loans
Don’t close old accounts

Establishing a long history of on time payments is the best thing for your score. Set up autopay so you never miss a bill and only make one or two purchases per month. This way you keep your bill affordable and never use more than 30% of your available credit line.

Boosting your score takes time – up to a year depending on where it was to begin with. Don’t be discouraged, just keep up the responsible behavior.

Curious about the credit card approval process?

Discover how long it really takes to get approved for a credit card!

Frequently asked questions

1. Is a secured credit card a prepaid card?

Secured cards and prepaid cards are fundamentally different. Secured ones require a deposit that acts as collateral and determines your limit, yet they function like traditional cards by allowing you to borrow against your deposit and repay over time. In contrast, you load prepaid cards with your own money. This money is then deducted as you make purchases. There is no borrowing involved with prepaid cards and so they do not impact your score.

2. Do I get my deposit back with a secured credit card?

Yes, with a secured card your deposit is not gone forever; it simply serves as collateral. You should receive it back when you upgrade to an unsecured card or close your account, as long as you’ve paid off any outstanding balances.

3. How fast does a secured card build credit?

The speed at which a secured card boosts your score varies by individual, but generally, you’ll see improvements within six to twelve months of responsible use. Demonstrate good habits, pay your bill on time, and keep your balance low and you’ll see your score improve.

4. How to use a secured credit card to build credit.

Improving your score with a secured card is the same as doing so with a traditional one. Pay your bill on time each month. Paying in full is even better. Keep your utilization ratio below 30% – less is better. Lenders don’t want you to be reliant on them. Follow these two basic rules and your score will improve over time.

Bottom line

The choice between a secured vs unsecured credit card depends on your score and financial situation. If your score is poor or fair – anything below 670 – then you are likely better off applying for a secured card – if you can afford the deposit. Not everyone can. That is why there are unsecured cards for low scores.

Either way, make sure you compare offers and find the best card with the lowest fees that fits your needs. Use it responsibly to improve your score and you’ll be able to qualify for a better card with rewards in the future.

1. Paycheck Advance is For eligible customers only. Your actual available Paycheck Advance amount will be displayed to you in the mobile app and may change from time to time. Conditions and eligibility may vary and are subject to change at any time, at the sole discretion of Finco Advance LLC, which offers this optional feature. Finco Advance LLC is a financial technology company, not a bank. Expedited disbursement of your Paycheck Advance is an optional feature that is subject to an Instant Access Fee and may not be available to all users. Expedited disbursements may take up to an hour. For more information, please refer to Paycheck Advance Terms and Conditions. Current is a financial technology company, not an FDIC-insured bank. FDIC insurance up to $250,000 only covers the failure of an FDIC-insured bank. Certain conditions must be satisfied for pass-through deposit insurance coverage to apply. Banking services provided by Choice Financial Group, Member FDIC, and Cross River Bank, Member FDIC. The Current Visa® Debit Card issued by Choice Financial Group, and the Current Visa® secured charge card issued by Cross River Bank, are both pursuant to licenses from Visa U.S.A. Inc. and may be used everywhere Visa debit or credit cards are accepted. Current Individual Account required to apply for the Current Visa® secured charge card. Independent approval required. Faster access to funds is based on comparison of traditional banking policies and deposit of paper checks from employers and government agencies versus deposits made electronically. Direct deposit and earlier availability of funds is subject to timing of payer’s submission of deposits.

2. Current is a financial technology company, not a bank. Banking services provided by Choice Financial Group, Member FDIC, and Cross River Bank, Member FDIC. The Current Visa® Debit Card is issued by Choice Financial Group pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. The Current Visa® secured charge card is issued by Cross River Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted. Please see the back of your Card for its issuing bank. Current Individual Account required to apply for the Current Visa® secured charge card. Independent approval required.

3. Individual results may vary. Using your credit card responsibly may allow you to improve your credit score. Credit building depends on various factors, including your payment history, credit utilization, length of credit history, and other financial activities.

4. Faster access to funds is based on comparison of traditional banking policies and deposit of paper checks from employers and government agencies versus deposits made electronically. Direct deposit and earlier availability of funds is subject to timing of payer’s submission of deposits.

5. Current is a financial technology company, not a bank. Banking services provided by Choice Financial Group. Funds held in Savings Pods are FDIC-insured on a pass-through basis up to $250,000 at our partner bank Choice Financial Group, member FDIC

6. Paycheck Advance is For eligible customers only. Your actual available Paycheck Advance amount will be displayed to you in the mobile app and may change from time to time. Conditions and eligibility may vary and are subject to change at any time, at the sole discretion of Finco Advance LLC, which offers this optional feature. Finco Advance LLC is a financial technology company, not a bank. Expedited disbursement of your Paycheck Advance is an optional feature that is subject to an Instant Access Fee and may not be available to all users. Expedited disbursements may take up to an hour. For more information, please refer to Paycheck Advance Terms and Conditions.

7. Actual overdraft amount may vary and is subject to change at any time, at Current’s sole discretion. In order to qualify and enroll in the Fee-Free Overdraft feature, you must receive $500 or more in Qualifying Deposits into your Current Account over the preceding 30-day period. For more information, please refer to Fee-free Overdraft Terms and Conditions.

8. You may earn Points in connection with your everyday spending and by completing other actions that Current designates as subject to the Current Points Program. The amount of Points granted for different actions as well as the purchase requirements necessary to earn Points will vary, and is subject to Current’s sole discretion. After qualifying, please allow 3-5 business days for points to post to your Current account. The Current Points program is not available to Teen Account holders. See Current Points Terms and Conditions.

9. Some fees may apply, including out of network ATM fees of $2.50 per transaction, late payment fees of 3% of any total due balance outstanding and past due for two or more billing cycles, foreign transaction fees of 3% of the full transaction amount (minimum $0.50), card replacement fees per card of $5 for regular delivery and $30 for expedited delivery, cash deposit fees of $3.50 per deposit, and third party processing fees.

10. Boost Bonuses are credited to your Savings Pods within 48 hours of enabling the Boost feature and on a daily basis thereafter, provided that the Savings Pod has accrued a Boost Bonus of at least $0.01. The Boost rate on Savings Pods is variable and may change at any time. The disclosed rate is effective as of August 1, 2023. Must have $0.01 in Savings Pods to earn a Boost rate of either 0.25% or 4.00% annually on the portion of balances up to $2000 per Savings Pod, up to $6000 total. The remaining balance earns 0.00%. A qualifying direct deposit of $200 or more is required for 4.00%. No minimum balance required. For more information, please refer to Current Boost Terms and Conditions.

11. Cryptocurrency services are powered by Zero Hash LLC and Zero Hash Liquidity Services LLC, and may not be available in all states. Terms and conditions apply. When you buy or sell cryptocurrency, a difference between the current market price and the price you buy or sell that asset for is called a spread. However, unlike most other exchanges Current does not charge an additional trading fee. Cryptocurrency transactions are a form of investment, and all investments are subject to investment risks, including possible loss of the principal amount invested. Cryptocurrency is not insured by the FDIC or any other government-backed or third-party insurance. Your purchase of cryptocurrency is not a deposit or other obligation of, or guaranteed by, Choice Financial Group or Cross River Bank. The cryptocurrency assets in your Zero Hash account are not held at Current, Choice Financial Group, or Cross River Bank. Current, Choice Financial Group, and Cross River Bank are not responsible for the cryptocurrency assets held in any Zero Hash account. Neither Current, Choice, nor Cross River Bank is involved in the purchase, sale, exchange of fiat funds for cryptocurrency, or custody of the cryptocurrencies. Terms and Conditions apply (platform and user agreements). Crypto on Current is not currently available in HI. Licensed to engage in Virtual Currency Business Activity by the New York State Department of Financial Services. This does not constitute investment advice.

12. Current is a financial technology company, not a bank. Banking services provided by Choice Financial Group. Your money is FDIC-insured on a pass-through basis up to $250,000 at each of our partner banks, Choice Financial Group and Cross River Bank, members FDIC.

13. Average value based on Fine Hotels + Resorts bookings in 2023 for stays of two nights. Benefits include daily breakfast for two, room upgrade upon arrival when available, $100 amenity, guaranteed 4PM late checkout, and noon check-in when available. Certain room categories not eligible for upgrade. $100 amenity varies by property. Actual value will vary based on property, room rate, upgrade availability, and use of benefits.

14. Up to $500 per Covered Trip that is delayed for more than 6 hours; and 2 claims per Eligible Card per 12 consecutive month period. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.

15. The maximum benefit amount for Trip Cancellation and Interruption Insurance is $10,000 per Covered Trip and $20,000 per Eligible Card per 12 consecutive month period. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.

16. Baggage Insurance Plan coverage can be in effect for Covered Persons for eligible lost, damaged, or stolen Baggage during their travel on a Common Carrier Vehicle (e.g. plane, train, ship, or bus) when the Entire Fare for a ticket for the trip (one- way or round-trip) is charged to an Eligible Card. Coverage can be provided for up to $2,000 for checked Baggage and up to a combined maximum of $3,000 for checked and carry-on baggage, in excess of coverage provided by the Common Carrier. The coverage is also subject to a $3,000 aggregate limit per Covered Trip. For New York State residents, there is a $2,000 per bag/suitcase limit for each Covered Person with a $10,000 aggregate maximum for all Covered Persons per Covered Trip. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.

17. Car Rental Loss and Damage Insurance can provide coverage up to $75,000 for theft of or damage to most rental vehicles when you use your eligible Card to reserve and pay for the entire eligible vehicle rental and decline the collision damage waiver or similar option offered by the Commercial Car Rental Company. This product provides secondary coverage and does not include liability coverage. Not all vehicle types or rentals are covered. Geographic restrictions apply. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company. Car Rental Loss or Damage Coverage is offered through American Express Travel Related Services Company, Inc.

18. Coverage for a Stolen or damaged Eligible Cellular Wireless Telephone is subject to the terms, conditions, exclusions, and limits of liability of this benefit. The maximum liability is $800, per claim, per Eligible Card Account. Each claim is subject to a $50 deductible. Coverage is limited to two (2) claims per Eligible Card Account per 12 month period. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by New Hampshire Insurance Company, an AIG Company.

19. When an American Express® Card Member charges a Covered Purchase to an Eligible Card, Extended Warranty§ can provide up to one extra year added to the Original Manufacturer’s Warranty. Applies to warranties of five (5) years or less. Coverage is up to the actual amount charged to your Card for the item up to a maximum of $10,000; not to exceed $50,000 per Card Member account per calendar year. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.

20. Purchase Protection is an embedded benefit of your Card Membership and requires no enrollment. It can help protect Covered Purchases made on your Eligible Card when they’re accidentally damaged, stolen, or lost, for up to 90 days from the Covered Purchase date. The coverage is limited to up to $10,000 per occurrence, up to $50,000 per Card Member account per calendar year. Coverage Limits Apply. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by AMEX Assurance Company.

21. Chime is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC.

22. The secured Chime Credit Builder Visa® Card is issued by Stride Bank, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted.

23. Banking services and debit card provided by The Bancorp Bank N.A. or Stride Bank, N.A., Members FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted.

24. The Annual Percentage Yield (“APY”) for the Chime Savings Account is variable and may change at any time. The disclosed APY is effective as of September 20, 2023. No minimum balance required. Must have $0.01 in savings to earn interest.

25. There’s no fee for the Chime Savings Account. Cash withdrawal and Third-party fees may apply to Chime Checking Accounts. You must have a Chime Checking Account to open a Chime Savings Account.

26. To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Chime Checking Account. The qualifying direct deposit must be from your employer, payroll provider, gig economy payer, or benefits payer by Automated Clearing House (ACH) deposit OR Original Credit Transaction (OCT). Bank ACH transfers, Pay Anyone transfers, verification or trial deposits from financial institutions, peer to peer transfers from services such as PayPal, Cash App, or Venmo, mobile check deposits, cash loads or deposits, one-time direct deposits, such as tax refunds and other similar transactions, and any deposit to which Chime deems to not be a qualifying direct deposit are not qualifying direct deposits.

27. Money added to Credit Builder will be held in a secured account as collateral for your Credit Builder Visa card, which means you can spend up to this amount on your card. This is money you can use to pay off your charges at the end of every month.

28. Based on a representative study conducted by Experian®, members who made their first purchase with Credit Builder between June 2020 and October 2020 observed an average FICO® Score 8 increase of 30 points after approximately 8 months. On-time payment history can have a positive impact on your credit score. Late payment may negatively impact your credit score.

29. On-time payment history may have a positive impact on your credit score. Late payment may negatively impact your credit score. Chime will report your activities to Transunion®, Experian®, and Equifax®. Impact on your credit may vary, as Credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.

30. Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date.

31. SpotMe® on Debit is an optional, no fee overdraft service attached to your Chime Checking Account. To qualify for the SpotMe on Debit service, you must receive $200 or more in qualifying direct deposits to your Chime Checking Account each month and have activated your Visa debit card. Qualifying members will be allowed to overdraw their Chime Checking Account for up to $20 on debit card purchases and cash withdrawals initially but may later be eligible for a higher limit of up to $200 or more based on Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. The SpotMe on Debit limit will be displayed within the Chime mobile app and is subject to change at any time, at Chime’s sole discretion. Although Chime does not charge any overdraft fees for SpotMe on Debit, there may be out-of-network or third-party fees associated with ATM transactions. SpotMe on Debit will not cover any non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. SpotMe on Debit Terms and Conditions.

32. Tipping or not tipping has no impact on your eligibility for SpotMe®.

33. Out-of-network ATM withdrawal fees may apply except at MoneyPass ATMs in a 7-Eleven, or any Allpoint or Visa Plus Alliance ATM.

34. Save When I Get Paid automatically transfers 10% of your direct deposits of $500 or more from your Checking Account into your savings account.

35. Round Ups automatically round up debit card purchases to the nearest dollar and transfer the round up from your Chime Checking Account to your savings account.

36. Mobile Check Deposit eligibility is determined by Chime in its sole discretion and may be granted based on various factors including, but not limited to, a member’s direct deposit enrollment status.

37. Funds are automatically debited from your Checking Account and typically deposited into the recipient’s Checking Account within seconds. Pay Anyone transactions will be monitored and may be held, delayed or blocked if the transfer could result in fraud or another form of financial harm. Sometimes instant transfers can be delayed.

38. Pay Anyone transactions will be monitored and may be held, delayed or blocked if the transfer could result in fraud or another form of financial harm. Sometimes instant transfers can be delayed. Non-Chime members must use a valid debit card to claim funds.

* EarnIn is not available for Connecticut residents

Rachel Alulis

Rachel Alulis has been the lead editor for Moneyfor’s credit cards team since 2015 and for the financial rewards team since 2023. Before joining Moneyfor, Rachel worked at USA Today and the Des Moines Register. She then established a successful freelance writing and editing business specializing in personal finance. Rachel holds a bachelor’s degree in journalism and an MBA.

What’s the Difference Between Secured and Unsecured Credit Cards?

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