Credit Cards » Credit Card Guides » What Is An Unsecured Credit Card?
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What Is An Unsecured Credit Card?

An unsecured credit card doesn't require collateral and usually offers better rewards and benefits compared to a secured credit card.
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024
The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024

The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.

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Table Of Content

What Is an Unsecured Credit Card?

Unsecured credit cards are credit cards that you can get which allow you to obtain credit without having to make an upfront security deposit. These bestow you the capacity of accessing to some benefits that secured credit cards do not possess.

Anyways, these cards are true for the “credit” part in their name. They revolve around the idea of credit lines. But, these credit lines are open-ended, meaning that they don’t have a particular deadline.

So, you can pay for the used credit without one, provided that your account remains active and that your credit standings are acceptable.

However, there are still some aspects to consider about unsecured credit cards:

  • Unsecured credit cards come with a credit limit.
  • You must make minimum payments in each billing cycle (they can vary based on how much credit you’ve taken, though).
  • These cards affect your credit scores.
  • Unpaid parts carry onto the following cycles, which can—and generally do—lead to interest.

Can I Get an Unsecured Card With Bad Credit?

You can gain access to unsecured credit cards with bad credit but your options will be far more restricted than if you had good or at least fair credit scores.

In most cases, you'll have to pay an annual fee. Most unsecured cards for bad credit don't offer a generous rewards rate if they offer it at all, so your rewards are limited.

The last thing to consider is the credit limit. While getting an unsecured card may be possible, your credit limit will probably be low, and you'll need to improve your credit score and make a history of monthly payments before you can get an increase.

Here are some unsecured credit cards options if you have bad credit:

Card
Rewards
Bonus
Annual Fee
Best For

avant card

Avant Credit Card
None
None
$59
Review

Milestone® Mastercard®

Milestone Mastercard®
None
None
$175 the first year; $49 thereafter
Review

Indigo card

Indigo® Mastercard®
None
None
$0 – $99
Review

How to Rebuild Credit With An Unsecured Card?

The positive aspect of unsecured credit cards is that they represent a chance for you to improve your score credits. Maybe in the past, you might have made some decisions that could have jeopardized your financial well-being. However, if you want to make amends for that, you can do it without a problem.

Here are some tools and notions you can employ to rebuild credit with an unsecured credit card:

  • Make sure you pay your bills on time. Paying your dues past their expiration date is one of the largest determinants of your credit score. This is singlehandedly the best you can do to improve your score’s health. 
  • Use reminders or set up automated payments. This goes hand in hand with the previous concept. Make sure you do not forget to pay your obligations.
  • Pay ENTIRE bills in time in order to avoid interest. Try your best not to only make the minimum payments. Go the extra mile. Your credit will thank you for it.
  • Keep your credit balance numbers low. The credit you employ also affects your credit scores. You can calculate this with your credit utilization rate. Make your best effort to keep this rate under 30%.

Secured vs. Unsecured Credit Card

As you have already noted by now, unsecured credit cards consist of credit cards that enable you to make use of credit without giving any sort of collateral in exchange. People with bad or scarce credit history use them to access credit.

On the other hand, secured credit cards offer the same services, but you have to make a minimum security deposit to receive any sort of credit limit.

Most banking institutions need you to make an initial deposit of $200, but the requirements can be different from bank to bank, and also depending on the secured credit card service you choose.

Unsecured Credit Card Pros and Cons

As you would expect, there are some natural good points and negative aspects to unsecured credit cards. Therefore, it is up to you to determine what option is best for you by analyzing and weighing in positives and negatives.

Pros
Cons
No Deposit
High Requirements
Build Credit
Debt Risk
Rewards
Annual Fee

Unsecured credit cards do not require upfront security deposits. All you must do is get your account approved in order to use it.

You can use unsecured credit cards to improve your credit, as long as you play your cards right. 

The rewards can be more tempting. Usually, unsecured credit card service providers put out more benefits for clients with the intention to capture new ones.

Unsecured credit cards are much harder to get approved than secured credit cards, and overall.

Some premium cards such as the Capital One Venture X card require +720 credit score.

Since your credit limit is higher, chances for overspending that may lead to dent are high.

Some unsecured credit cards' annual fees can be very high. 

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How to Choose an Unsecured Credit Card?

When the time to choose an unsecured credit card service provider, it is important that you hold into account the diverse variables that are bound to influence the outcome of the service that you will be provided.

For instance, imagine that you are a person that wants to travel around the world. If this is you, you would probably want to choose a travel card.

Maybe you are a college student. You are most likely going to have to pay for your student loan debt down the road, so it would be beneficial to aim for a company that extends incentives for college students.

So, what you need to determine first is the use you are going to give to your unsecured credit card.

Factors To Consider When Choosing

Having determined this, you can also ponder some other aspects:

  • Required Documents: Look out for documentation requirements. Some brands demand more paperwork than others. If you are negatively influenced by bureaucracy, it would be advisable to consider different options.
  • Rewards or Welcome bonus: unsecured cards offer a great welcome bonus and varied rewards rates, depending on your card type. Check out what you get and how much it fits your lifestyle.
  • Fees: Compare the fees between different cards. Some fees will be higher than others, also depending on the use you intend for your card. Double-check for any hidden fees, or questionable user agreement clauses.
  • Credit Limit: Check out what's your initial credit limit to make sure you can cover your ongoing expenses.
  • Reporting to credit bureaus:  If you're looking to build credit or have a bad credit score, make sure your issuer reports your payments to the three main credit reporting agencies. It can increase your score faster.
The Blue Cash Preferred Card from American Express
The Blue Cash Preferred Card from American Express. Unsecured card with everyday spending benefits. (Photo by photobyphotoboy/Shutterstock)

How to Apply for an Unsecured Credit Card?

There are a number of steps to be taken before you apply for an unsecured credit card. Given that depending on the credit score you have, you can access different alternatives. Intuitively, the higher the score, the better chances you have at securing a better deal for yourself.

Here are the different steps you need to take to apply for an unsecured credit card:

  1. Know what are your credit scores. You can monitor your scores at several sites that you can find on the Internet. Good credit scores range around the vicinity of 670 to 739 FICO points. Any lower than that is on the bad credit side, and in contrast, any higher is a good score.
  2. Search for different companies that offer unsecured credit card issuers. 
  3. Compare what the different companies have to offer. Once you establish comparisons, go for one.
  4. Begin the application process. It usually entails providing your basic contact information, your Social Security Number, IDs, and a form of income verification.
  5. Ensure that the application is filled out correctly and send it.
  6. Set out to discover how long the procedure takes place. Once you get approved, you can claim your card.

Unsecured Credit Card Tips

The use of credit cards tends to befuddle people. This can be highly detrimental to your economy since credit cards can be a double-edged sword. Suppose you learn how to use them right. In that case, you will have little to no worries to be cautious about when utilizing your unsecured credit card.

For example, if you have been recently employed for the first time, or you are just starting out, you must have little to no knowledge about the ins and outs of how to use an unsecured credit card properly.

Here are some tips you can apply for squeezing all of the juice out of your unsecured credit card:

  • Control your spending: When you are beginning your adult life, it can be very tempting to go overboard with expenses. Always strive to spend within your means.
  • Maximize Rewards: whether you get a cashback, point, or miles rewards card – make sure to leverage it and make the most of the rewards you can get. Know your top categories or stores where you can get high cash back.
  • Maximize Welcome Bonus – many unsecured credit cards offer a signup bonus if you spend a sum of money for a limited time. This is worth hundreds of dollars.
  • Improve score: Make your best effort to establish a positive credit history from the get-go. Inadequate spending, late payments, and many other deeds can wreak havoc on your history. 
  • Pay In Full: Pay in full and on time to avoid any form of compounding interest. APRs can become a nightmare when they get out of your control.
Chase Freedom Flex Unsecured card
Chase Freedom Flex, Unsecured card with rotating categories by Chase (Photo by photobyphotoboy/Shutterstock)

FAQs

The credit limit varies between cards depending on issuers as well as customer creditworthiness and needs. Some cards offer $500 while other can offer $10,000 and more as an initial credit limit.

You may require at least a VantageScore of 601 and 660 points, or a FICO score of 580 to 669 points to get one. You can get one with lower credit scores, but that will largely depend on the company, and the requirements can be more numerous.

Applying for an unsecured credit card can hurt your credit as much as applying for a secured card or any other type of card available in the market. In fact, it can even help you build or improve your current credit if used responsibly.

Unsecured credit cards tend to be harder to get approved after you have undergone bankruptcy.

However, once you are discharged and the issue is settled, you can apply for one. You will still need to watch out for APRs and other fees.

Credit unions such as PenFED Credit Union and Oklahoma Central offer unsecured credit cards for their users.

The application and evaluation processes can be lengthier. If you are a longtime member of these credit unions, it can be somewhat faster.

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Baruch Mann (Silvermann)

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
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