CardRates.com Guide: Unsecured Cards
Unsecured credit cards are the most common form of credit issued in the U.S. and around the world. An unsecured credit card is a form of pre-approved loan that allows a user to make purchases and pay for services without being required to get separate approvals each time.
If the credit card holder shows a willingness and ability to pay back the amount they charge, the credit card issuer keeps the credit line active. As long as they make regular payments and don’t exceed their credit limits, the holder can continue to use the card.
This type of revolving credit line is called an unsecured credit card, and it’s what most people use.
The Credit Card Issuer Pays the Merchant
What’s the difference between a secured and an unsecured credit card? If you think about it, an unsecured credit card is really a lender trusting us with their money. The lender (or credit card issuer) is making the payment to the merchant or vendor that accepts our card. In return, we pay our credit card bill when it’s due and a little extra in interest — that’s it in a nutshell.
But what if we can’t get a bank to give us a credit card? If we don’t have a good credit history, or if we’ve had problems making our credit card payments in the past, it’s unlikely a bank will give us an unsecured credit card.
The alternative is to get a secured credit card. The premise is simple — if we put a deposit into an account held by the card issuer, they’ll give us a secured credit card for the amount we put down (or close to it) and issue us a secured card. It’s no risk to them, and it gets us a card we can use in place of cash. Many people do this until they can rebuild their credit.
There’s No Up-front Deposit Required
In contrast to a secured credit card, an unsecured card doesn’t require us to put a deposit down before we get the card. It also gives us a credit line that can be thousands of dollars and can be repaid up to 30 days in the future. This is the advantage of having a good credit history and establishing a good credit score.
And that’s all there is to know about unsecured credit cards. If you think an unsecured credit card sounds right for you, give it a go!
Photo source: englinea.com
Editorial Note: Opinions expressed here are author's alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.