A credit card is a vital and important financial to for consumers. Choosing the right kind of card could be vital to your spending habits and credit history. The consumer finds that his spending about becomes very limited without having a credit card. Most of the consumers rely on a credit card for making different kind of purchases especially in the current modern times when certain transactions such as online booking of hotels, tickets and purchases would be impossible without having a credit card. There are different categories amongst which various credit cards can be divided into. One category of differentiation between credit cards is a secured and an unsecured credit card. An unsecured credit card is a typical traditional credit card that offers the consumer the ability to charge the amount of this choice on credit every month whereas a secured credit card is usually made available to people who have a sub-prime credit score. Below we will discuss the main differences between secured and an unsecured credit card in a little more detail.
Unsecured Credit Cards
Unsecured credit cards are the traditional credit cards that are made available to consumers to charge are some of money on credit every month. A consumer can charge any amount of money to their unsecured credit card as long as they stay within the credit limit. These credit cards are made available for free to consumer and usually do not have a rental or transaction fee associated with.
The exception is the kind of credit cards that are extremely privileged credit cards which may have an annual fee associated with them such as a credit card with no credit limit. The only charge that a credit card usually levies on a consumer is when the consumer rewards his balance from one month to another and has to take an interest rate on his outstanding balance.
There are no deposits or fees charged by the credit card company while approving a consumer for an unsecured credit card. Likewise there is also no particular fee for making a transaction on the credit card save for the interest rate charged on a monthly balance when the consumer chooses to carry forward these accounts charges from one month to another by paying them off partially.
Secured Credit Cards
Secured credit cards are usually made available to people who have a sub-prime credit score and cannot qualify for an unsecured credit card. Secured credit cards are also an option for people who do not want a new credit line being opened in your name such as parents who want to provide a credit card to their children, one thing are credit card for the purpose of travel etc.
A secured credit card requires the consumer do make a deposit beforehand. This deposit is put in an account that is directly linked to the credit card. The credit limit of the credit card may depend on the amount of deposit made and this either equal to the entire amount of the deposit or about.
A secured credit card approval process may require the consumer to pay processing and approval charges as well. A secured credit card offers the advantage of working like a conventional credit card in every other way except for the initial deposit that needs to be made that acts as collateral for the credit made available to the consumer. The deposit that the consumer is required to make for a secured credit card is used as collateral and security for the creditor in the event that the consumer is not able to pay his debt on the credit card. This works to the advantage of the consumer as he can use this credit card in places where debit card will not be accepted such as hotel bookings, car rentals etc.
Both secured and unsecured credit cards are available to the consumer from major credit card providers in the country. Both unsecured and secured credit cards can be used to build credit history of an individual as long as the creditor reports the uses to the credit bureau.
When choosing an unsecured credit card one of the major decisive factors is the rate of interest that is charged to the consumer for revolving balances whereas when choosing a secured credit card this factor can be the initial processing charges and the additional charges that are levied on transactions.