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An unsecured card is simply a credit card that doesn't require a security deposit as collateral. This is the most common type of credit card, and it's likely the type you may already use if you have a credit card. The alternative is a secured credit card, which requires you to provide a refundable security deposit to the card issuer when you open the account.
How Does an Unsecured Credit Card Work?
Unsecured credit cards are a type of revolving credit account that doesn't require any collateral―an asset that a lender can take if a borrower doesn't repay a loan.
When you apply for an unsecured card, the credit card issuer will generally review your credit report, your credit score and information from your application (such as your income and monthly housing payments). If you're already a customer of the financial institution issuing the card, your history with the company may also be considered.
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Unlike secured credit cards, you don't have to pledge any collateral to get an unsecured card. The issuer will either approve or deny your application based on the material it reviews. It may also use this information to help determine your card's credit limit and interest rate.
When you use your unsecured credit card, the transaction amounts are added to your card's balance, and you can make purchases until your balance reaches your account's credit limit. Paying down the balance frees up your available credit—letting you repeatedly borrow against your credit limit without having to apply for a new line of credit.
At the end of the billing cycle (these are typically about a month long), all your transactions are added together to determine your statement balance. The card issuer will then send you a statement at least three weeks before your bill is due. You can make a minimum payment, pay the statement balance in full, pay the current balance or pay some amount in between.
If you pay your entire statement balance every month, you won't pay any interest on your purchases. However, if you pay less than the full amount, you can revolve your remaining balance from one month to the next and pay it off over time.
Being able to pay off your balance over time can be helpful, especially if you use your credit card for a large or unexpected purchase. However, the unpaid portion you carry over to your next billing cycle and any new purchases you make will start to accrue interest every day.
Unsecured Card vs. Secured Card
Unsecured cards and secured credit cards are both revolving credit accounts, and they work identically in many ways. In fact, you often won't know whether a card is unsecured or secured just by looking at it. The main difference between the two is that you have to send the card issuer a refundable security deposit to open a secured credit card.
Your security deposit is collateral, and the card issuer can keep the security deposit if you stop paying your credit card bill. Because of this, it's often much easier to get approved for a secured credit card, which is why they're a popular option for people who are brand new to credit or trying to rebuild their credit. Defaulting on any credit card will typically result in major credit score harm.
Security deposits often have a minimum and maximum amount—ranging from around $200 to a couple thousand—and the deposit you give will often equal your card's credit limit.
What Credit Score Is Required for an Unsecured Credit Card?
Unsecured credit cards often have a higher credit score requirement than secured credit cards, but it's possible to qualify for an unsecured card with poor credit. In general:
- The best credit cards for bad or poor credit are a mix of secured and unsecured cards.
- The best credit cards for fair credit tend to be unsecured cards.
- The best rewards cards are unsecured cards, although there are secured cards that offer rewards.
The exact credit score requirement can depend on the credit card, and it often isn't shared with the public. In some cases, there might not be a minimum credit score. And, even if your score is above the minimum, other factors can impact your application. For example, you could have an excellent score and still be denied if you opened too many credit cards recently or your income is too low.
Check Your Credit Before Applying
If you're looking into new credit cards, checking your credit score is a good first step. Experian offers a FICO® Score☉ for free, along with credit report and score monitoring. After creating an account, you can also look for personalized credit card offers based on your unique credit file. Checking for offers won't impact your credit score, but submitting a credit card application may result in a hard inquiry that may have a temporary negative effect on your credit.