Secured Vs Unsecured Credit Cards: Which Should You Get First

**Navigating the World of Credit Cards: A Guide to Secured vs Unsecured Options**

When it comes to building credit or managing debt, a credit card can be an attractive option. However, with so many types of credit cards available, it’s essential to understand the difference between secured and unsecured options. In this article, we’ll explore the pros and cons of each type, including financial details, real examples, APR figures, and actionable advice.

**Secured Credit Cards: What They Are**

A secured credit card is a type of credit card that requires a security deposit, which becomes your credit limit. To open a secured credit card, you’ll need to provide proof of identity, income, and employment. Once approved, the card issuer will hold the security deposit until it’s paid off.

**Unsecured Credit Cards: What They Are**

An unsecured credit card, on the other hand, doesn’t require a security deposit. You can apply for an unsecured credit card with good to excellent credit, and the card issuer will report your payments to the credit bureaus if you don’t make them on time.

**Key Differences**

Here are some key differences between secured and unsecured credit cards:

* **Security Deposit**: Secured credit cards require a security deposit, while unsecured credit cards do not.
* **Credit Limit**: Unsecured credit cards often have lower credit limits, as they’re not backed by a security deposit.
* **APR**: APRs for secured credit cards can be higher than those for unsecured credit cards, ranging from 12% to 22%.
* **Fees**: Secured credit cards may charge annual fees, while unsecured credit cards often don’t.

**Real Examples**

Let’s look at two real examples:

* A person with excellent credit (720+ credit score) might consider a secured Mastercard with an APR of 15%. To pay off the balance in 12 months, they’ll need to make monthly payments of $125.
* Someone with fair credit (580-699 credit score) might apply for a secured Visa card. With an APR of 18%, they’ll need to make monthly payments of $150.

**APR Figures**

Here are some APR figures for popular unsecured credit cards:

* American Express Blue Cash Preferred: 12% – 14% APR
* Chase Sapphire Preferred: 13% – 14% APR
* Citi ThankYou Premier: 15.49%