Secured Vs Unsecured Credit Cards: Which Should You Get First

**Choosing the Right Credit Card: Secured vs Unsecured**

When it comes to credit cards, one of the most crucial decisions you’ll make is whether to opt for a secured or unsecured card. Both types of cards can be beneficial, but they cater to different financial situations and goals.

**Secured Credit Cards**

A secured credit card works as a guarantee that you have a solid credit history. When you apply for a secured card, the issuer will report your application to the three major credit bureaus (Experian, TransUnion, and Equifax). If you pay your balance in full each month, you can rebuild your credit score over time.

Secured cards usually require a security deposit, which becomes your credit limit. This means that if you make payments on time, you’ll be able to access the funds without worrying about high interest rates or fees. However, you must still pay back the balance in full each month to avoid debt accumulation.

Here’s an example of how secured cards work:

* You apply for a $500 secured card and receive $500 as your credit limit.
* If you make $200 payments on time, your credit score may improve by 10-20 points.
* However, if you miss a payment or accumulate a balance, it can negatively impact your credit score.

**Unsecured Credit Cards**

An unsecured credit card is issued without any collateral (your assets). These cards often have higher APRs and fees compared to secured cards. Unsecured cards can be used for purchases, cash advances, and balance transfers.

If you’re building credit or need a credit card for everyday expenses, an unsecured card might be a better option. However, if you want to pay off high-interest debt quickly, a secured card could be more suitable.

Here’s an example of how unsecured cards work:

* You apply for an $1,000 unsecured credit card with a 20% APR.
* If you make $200 payments on time each month, your credit utilization ratio may decrease by 10-20%.

**APR Figures**

When shopping for credit cards, it’s essential to compare the APRs. Here are some examples:

* Secured cards:
+ Capital One Secured Mastercard: 14.74% – 24.74% (Variable)
+ Discover it Secured: 13.99% – 22.99% (Variable)
* Unsecured cards:
+ Chase Freedom Unlimited: