What Is an Unsecured Credit Card?
Unsecured credit cards are the most common type of credit card. You don’t need a security deposit for approval.
The issuer of an unsecured credit card does not have a security deposit that they can collect if you do not pay your credit card balance.
Instead, the creditor has the option of pursuing additional collection measures.
This involves reporting the unpaid sum to a credit bureau, forwarding your account to a third-party debt collector, suing you in court, and requesting permission from the court to garnish your wages.
Note: When people refer to a “credit card,” they usually mean an unsecured credit card. This is due to the fact that the great majority of credit cards on the market today are unsecured.
Because they are unsecured and have no collateral, unsecured credit cards are different from secured loans, such as mortgage loans, auto loans, and secured credit cards.
They are not directly connected to any property, so the issuer has no right to take your property away if you default on payments.
How Unsecured Credit Cards Work
Unsecured credit cards are available from the majority of banks, credit unions, and other financial service providers.
To obtain one, you must fill out an application with your personal information and agree to a credit check.
After you’re authorized for an unsecured credit account, you’ll receive a card that you may use to make purchases in stores, online, and over the phone.
Tip: In general, to qualify for a credit card with a reasonable interest rate, you need to have a good credit score (usually 670 and above). You may be able to get an unsecured card with a lower credit score, but you’ll likely have to pay a higher interest rate.
Unsecured credit cards fall under the category of revolving credit. This means you’re allowed to spend up to a particular amount on the account, and you have the option of paying off the debt in full at the end of a monthly billing cycle or revolving it to the following month.
You do not have to pay interest on what you borrowed if you pay your debt in full.
When you opt to revolve the balance, you must normally pay interest on it and make at least the mandatory minimum payment each month.
Secured vs Unsecured Credit Cards
Secured credit cards, in contrast to unsecured credit cards, require you to pay a deposit as collateral against the credit line granted. Consider it a credit card that you pay for yourself.
- Horizon Gold Card with $500 unsecured credit limit
- No credit check needed, Bad credit score accepted
- 0% APR on credit
- One time activation fee: $5. Monthly membership fee: $24.95
If the applicant is commonly considered a credit risk—that is, they have no credit history or a low credit score (less than 580), issuers will usually request a deposit on a credit.
If you default on a balance, the credit card company has the authority to withdraw the deposit you made to settle the amount.
In some situations, the cardholder may additionally be required to pay an annual fee. Nevertheless, in compensation for the cost, these cards are less likely to offer rewards programs such as cash back or points toward purchases.
| Unsecured Credit Cards | Secured Credit Cards |
|---|---|
| Don’t require a deposit for collateral | Require a deposit for collateral |
| Usually requires a good credit score | Ideal for people with poor credit scores |
| Often offers rewards | Don’t usually offer reward programs |
Advantages of Unsecured Credit Cards
Despite the potential legal risk of using an unsecured credit card, most people would prefer an unsecured credit card over a secured one.
This is because it eliminates the need to pay out money at the outset; money that could otherwise be sitting in a bank earning interest.
Furthermore, unsecured credit cards often have cheaper interest rates and reward schemes, which are uncommon with secured credit cards.
How To Apply for an Unsecured Credit Card
Banks are unlikely to give you an unsecured credit card if you have a poor credit score or failed to make timely payments in the past.
The issuer may also deny you if you have too many credit cards, too many credit inquiries or insufficient income.
Before applying for unsecured credit cards, you should pull your credit report and make sure there are no flaws that may cause the issuer to reject you.
- No annual fee
- Earn 2% cash back rewards
- Zero-interest intro offer
- Good credit required
You can request a free credit report from the three major reporting bureaus once every 12 months at Annual Credit Report. You can also monitor your credit at Credit Sesame or Credit Karma for free.
How to Get Unsecured Credit Cards for Bad Credit
Individuals with poor credit, no credit, or who have recently declared bankruptcy will have the most difficulty obtaining an unsecured credit card.
Most creditors view your bad credit history as a risk that you will be unable to repay what you borrow, even if you want to.
As a result, a secured credit card is your best bet for reestablishing your credit and qualifying for a better credit card if you’re no longer considered a risk.
You can improve your chances of qualifying for an unsecured credit card by using your secured credit card wisely for at least six months. Don’t overspend and pay off past due amounts as fast as possible.
After using your credit card wisely for a few months your card issuer may convert it to an unsecured credit card and refund your security deposit. However, be aware that it might take a few months to be approved.
Another option is to get a friend or family member to get a joint unsecured credit card with you. This gives you a chance to improve your credit score and will keep you from paying a security deposit.
The Best Unsecured Credit Cards
Surge MasterCard
The Surge MasterCard is a popular unsecured credit card that offers an initial credit limit of $300 – $1,000.
Credit limits may be eligible for an increase after six months, making this a great option to improve your credit score.
- See if you’re Pre-Qualified with no impact to your credit score
- Monthly reporting to the three major credit bureaus
- All credit types welcome to apply
- Free access to your Vantage 3.0 score from Experian* (When you sign up for e-statements)
Enjoy peace of mind with the Surge MasterCard as it offers $0 fraud liability so you won’t be held responsible for unauthorized charges on your card.
You’ll get free monthly credit scores and monthly reporting to all three major credit bureaus – TransUnion, Equifax, and Experian.
Total Visa Unsecured Credit Card
The Total Visa® Unsecured Credit Card offers an initial credit limit of $00 with manageable monthly payments and a fast application process.
- Fast and easy application process
- $300 credit limit
- Manageable monthly payments
- Choose your card design
You can select your favorite card design and use your card at merchants nationwide across the USA and online.
The Total Visa® Unsecured Credit Card has an annual fee of $75 for the first year and $48 thereafter.
The APR is 34.99% and there are no cash advance fees for the first year.
Milestone MasterCard®
The Milestone MasterCard® allows you to enjoy the benefits of a credit card without the need for a security deposit.
Milestone MasterCard®- No security deposit
- Zero liability
- Quick pre-qualification
- Fraud protection
If you don’t have a good credit history, or even have a prior bankruptcy, this is a good credit card option for you. It comes with fraud protection and zero liability.
Unsecured Credit Card FAQs
What is an unsecured credit card?
An unsecured credit card is a credit card that does not require collateral such as a security deposit in order to qualify.
What is an unsecured credit card for fair credit?
Unsecured credit cards for fair credit do not require a cash deposit like secured cards. These cards are traditional credit cards that you can use to pay for purchases and they will be subject to fees and interest rates.
