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Credit cards – Insured VS. Unsafe


Credit cards have been around for quite some time and are here to stay. The question that many people have regarding them involves the different types. There are quite a few minor variations with each card, and some important ones. The difference I want to focus on today is secured credit versus unsecured credit. The insured credit summary requires some type of deposit based on your creditworthiness (your credit score, debt and everything else mentioned HERE). Let's go deeper and learn about the pros and cons.


Secured credit

Secured credit cards are very similar to traditional credit cards, but require some type of deposit. The required deposit will be based on your creditworthiness. If your credit score is very low, you should expect to pay any credit line you wish to have. This means that if you want a $ 200 line of credit, you will have to deposit $ 200 into the account. If your credit is decent (floating around the 600 mark), you will only be responsible for a small deposit that is a part of your credit limit.

This may initially sound like a bad deal, but it is usually aimed at people without credit or with bad credit. This will allow you to build your credit or rebuild your credit if necessary. You can use these cards in all places where credit cards are accepted. There are no other limitations with these cards other than the credit limit. With many companies, you can even upgrade your secured credit card line to an unsecured one. You will even be reimbursed the initial deposit you made when converting the account in some cases. Now that is a good deal!

Unsecured Credit

Unsecured credit is the traditional form of credit. This form of credit card has a credit limit based solely on your creditworthiness, no deposit or other requirements. The factors that influence the amount for which it is approved are the following

  • Your credit score
  • Monthly income
  • Amount due for important bills each month
  • Open credit lines.
  • Open accounts with creditor or associated company

After taking all that into consideration, you are approved or disapproved. If approved, you will be granted the amount for which it was approved and, generally, you will be granted a period of time in which your card will arrive. For an unsecured credit card, you would need at least a score of around the top 500. There are some cases in which people approved a credit card with a credit score of 500 to medium low, but they are definitely the exception and not the norm. Even then, the limit on the card more than likely was quite low.


Choose wisely

If you have a solid credit score and are financially stable, you can opt for any of them. While at The Credit Dojo we would recommend an unsecured credit card if you can get approval, sometimes an insured card works better. Usually, if one has to use their own money for credit, they will use it wisely and only for emergencies. They would also be more inclined to pay, since the creditor does not have much to lose. This may help some people, as they will be even more likely to make regular payments. Avoid using credit just because it is available.

If you are financially stable and feel that you can handle your credit well, I would recommend that you request an unsecured credit card. Otherwise, if you have some financial problems or a low credit score, then a secured credit card is your best option. There is a credit card available for almost any financial situation. Remember, be sure to use your credit card wisely. Don't waste just because you have credit available. If you want to know more about your credit score (the most important thing creditors review when making credit decisions) and the things you can do to improve it, visit the following articles:

Thank you for visiting The Credit Dojo. As always, I hope you learned something new today.

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