Secured Credit Cards Vs. Unsecured Credit Cards – The Debate

“All credit cards are unsecured”; “All credit cards are secured”; “There are secured credit cards and unsecured credit cards”

During the course of an evening it is possible to hear variations of all three of the sub-captioned claims. The truth, however, is a little more moot. So what is the debate between secured credit cards and unsecured credit cards?

Secured credit cards

In most instances you’ll be told that a secured credit card is a card issued to you on the understanding that you provide the issuer with security against the amount borrowed on the card. In most cases the security provided is a savings you have in your bank deposit account, with the limit being the balance of the account at any given time. If at any time you cannot make a payment on the card then the amount you owe will be set-off against the balance of the card. As a result, this type of card issue is very popular issue for anyone recovering from a bad credit history or credit rating and is essentially and easy way for them to re-establish their credit history.

Unsecured credit cards

Most people will have you believe that unsecured credit cards are cards issued by the mainstream providers and the only obligation you have is to pay, at minimum, you minimum monthly payment each month. In the event that you cannot pay, then the issuer has no recourse to your bank account to try and force you to pay and you’ll only suffer the prospective of a bad credit history and rating in the future.

The ‘moot’ point issue

The reason why a moot point exists is technically any credit card issuer will tell you that any purchase you make is secured against that very purchase until such time as you have repaid your bill in full. The fact of the matter is, the credit card company doesn’t want the hassle of suing for the purchased product even if it could.

So, should you applying for a secured or unsecured card?

The answer to this question very much depends on what your credit history is. However, one anomaly exists that must be unique to the credit card industry. In most cases a secured debt is afforded the same rate of interest (if not higher) as that of an unsecured card! In other words, forgetting the fact that you have already provided the issuer with security over the entire potential liability, they’ll still charge you the same rate of interest on any outstanding balance as they would with a normal unsecured issued card. For this reason, if no other, so long as you have the option of applying for a both an unsecured and secured credit card, and are not trying to repair your damaged credit rating, you should always try and apply for an unsecured credit card!