Secured and unsecured credit cards are two different types of credit cards with distinct features. Although the most obvious difference between them is that secured credit cards require a security deposit, a closer look reveals a few more important differences that could affect you as a consumer.
In terms of usage, unsecured credit cards are usually the most preferred, as they do not require putting money upfront and do not come with any strings attached. Unsecured credit cards are usually linked to a line of credit, meaning that you can use the card to purchase items up to a certain limit without depositing your own funds. These cards are available to most people with a good credit score and are typically offered with attractive promotional offers and other benefits.
Conversely, secured credit cards like Neo are typically used by those with limited or poor credit. In order to open a secured credit card, you must deposit a certain amount of money – usually up to $500. The amount of your deposit is often equal to the credit limit on the card. For example, if you deposit $500, you can only use the card up to that amount. Additionally, secured credit cards generally have higher interest rates and annual fees than unsecured credit cards.
While unsecured credit cards are easier to get, Neo secured credit card offers some benefits that unsecured cards do not. First, secured credit cards can help you build or rebuild your credit score. This is because the payment histories and credit utilization are reported to the credit bureaus when you make payments using your secured credit card. This helps you to establish a history of timely payments and demonstrate responsible credit usage, which may be beneficial to your credit score.
Second, secured credit cards may offer you limited-time bonuses such as cash back rewards, introductory APRs and other incentives. These promotional offers are usually not available with unsecured credit cards.
Finally, secured credit cards are more lenient when it comes to eligibility requirements. Since you are putting down a security deposit, you may still be eligible for a secured credit card even if you have a poor credit score or a limited credit history.
When choosing between secured or unsecured credit cards, it is important to determine which one best suits your needs. You may consider the differences between them such as the deposit requirements, interest rates and the additional benefits that one may offer over the other. Ultimately, secured credit cards can be a great way for you to increase and rebuild your credit score and demonstrate responsible credit usage. Unsecured credit cards, on the other hand, are a great way to get a line of credit without putting up any money.