How to Distinguish a Secured from an Unsecured Credit Card WWW.NEWHORIZON.ORG
In this presentation, we’ll talk about the factors that will help differentiate a secured credit card from an unsecured card program. Here are 4 distinguishing factors.
The security deposit requirement. As their names imply, secured lines of credit always come with a security or collateral requirement. In the case of secured credit cards, such requirement comes in the form of an initial deposit. But what is it for? The deposit actually serves two important purposes. First, it serves as a guarantee for repayment. In case you fail to keep up with your credit card bills, your card issuer can easily tap on the deposit you have provided to settle your unpaid charges. Second, it serves as the basis for the spending limit that will be imposed on your card program. In most cases, the amount of your security deposit will determine how much bills or purchases you can charge on your line of credit. For instance, if you submitted $500 to your card issuer then, you can enjoy a credit limit of up to $500.
On the other hand, unsecured credit cards, in general, don’t have initial deposit requirements. You can be granted the card you need, even if you don’t offer collateral to your card issuer. As long as you meet the eligibility requirements on the credit card you wish to take out then, you can look forward to receiving the line of credit that you have applied for.
The credit score requirement. Issuers of secured credit cards rarely run credit checks on their card applicants. In fact, consumers can look forward to being granted the secured lines of credit they need, regardless of their credit standing. Unlike secured card programs, however, unsecured credit cards are only offered to consumers with excellent credit standing. Most companies that provide this type of credit card not only have strict qualiďŹ cations, but they also impose stringent credit score requirements on the programs they offer to prospective cardholders.
How soon you can receive the line of credit you applied for. Since issuers of secured card programs rarely run credit checks they can provide instant approval to their card applicants. This means that if you can ďŹ le your application and submit the security deposit as well as the required ďŹ nancial and personal documents, early; you can look forward to receiving the credit card you need in the earliest time possible. On the other hand, applications for unsecured credit cards might take a while to get approved. This is because card issuers need to take enough time to consider not just the credit standing but also the ďŹ nancial capability of their card applicants.