What is an unsecured credit card?
An unsecured card is a type of credit card that doesn’t require a security deposit to open an account. They’re called unsecured cards because they don’t require collateral to back, or secure, the account like secured credit cards do.
What you’ll learn:
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Most credit cards are unsecured, meaning they don’t require a security deposit to access a credit line.
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Unsecured credit cards may come with higher credit limits and lower interest rates compared to secured credit cards.
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Like a secured credit card, an unsecured card can be a useful tool for building credit when used responsibly.
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Having good or excellent credit scores may make it easier to qualify for an unsecured card with better terms.
How does an unsecured credit card work?
Unsecured credit cards are examples of revolving credit. They have a credit limit, which is the maximum amount a cardholder can borrow. The amount of available credit goes down as the card is used. As debt is repaid, available credit is restored.
They’re typically open-ended, meaning cardholders can borrow and repay repeatedly while the account is open.
Unpaid balances carry over to the next billing cycle and may accrue interest. Paying off credit card balances each billing cycle is one way to avoid interest charges on new purchases.
Unsecured credit cards vs. secured credit cards
The major difference between a secured and an unsecured card is the security deposit required to open a secured credit card account. That deposit is typically refundable and serves as collateral for the account.
What credit score do you need for an unsecured credit card?
People with good or excellent credit scores may have more options for unsecured credit cards than those with fair credit scores or lower. Credit card issuers make lending decisions, not credit-scoring companies. But data from those companies can still give you an idea about how your scores might be judged. For instance, FICO reports the following score categories:
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Exceptional: 850-800
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Very good: 799-740
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Good: 739-670
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Fair: 669-580
- Poor: 579 and below.
How to get an unsecured credit card
Getting an unsecured credit card involves a few key steps. Here’s a breakdown of what the process might look like:
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Check your credit scores: Checking your credit scores before you apply could help you identify which cards you’ll likely qualify for.
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Research and compare: Comparing features and terms could help you find the best fit for your spending habits. Interest rates, rewards and fees are a few places to start.
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Apply: If you have a card in mind, you can submit an application, which is commonly done online. Expect to be asked for some personal and financial details. You may want to see whether you’re pre-approved before you apply. At Capital One, checking won’t impact your credit scores.
- Await a decision: The card issuer will review your application and creditworthiness to decide whether to approve you. This could be nearly instant, but it could take longer.
Who should consider using an unsecured credit card?
Whether an unsecured credit card is right for you depends on your financial situation and goals. If used responsibly, credit cards can be great tools for building credit, budgeting and covering unexpected expenses. If a card offers miles or cash back, you could be rewarded for spending you’re doing already.
Alternatives to unsecured credit cards
If you don’t qualify for an unsecured credit card right now, you may still have options to access credit:
Secured credit cards
You have to put down a refundable security deposit to open a secured credit card account. Once you’ve been approved and made your deposit, you can use the card like you’d use an unsecured card.
Authorized user
Becoming an authorized user on a trusted friend’s account or a family member’s account could allow you access to an unsecured credit line. There’s generally no credit check or application involved to become an authorized user.
Plus, if the account is used responsibly, becoming an authorized user could help you build credit. But it depends on the credit card issuer’s policies and the credit bureaus’ policies about how activity is reported and recorded. And if the authorized user or the account holder doesn’t use the card responsibly, it can hurt both people’s credit scores.
Unsecured credit card FAQ
Still have questions about unsecured credit cards? Here are answers to some frequently asked questions:
Are credit cards unsecured debt?
If a credit card doesn’t require collateral, such as a security deposit, it’s considered unsecured debt. That’s the case for most credit cards.
Will unsecured credit cards hurt my credit scores?
Both secured and unsecured credit cards could have an impact on your credit scores, depending on how you use them. With responsible use, unsecured credit cards could help you build your credit. But missing payments and overspending could have the opposite effect.
Applying for any kind of credit card could temporarily cause your credit scores to drop. That’s because applying for credit requires a hard credit check, which can cause a small temporary dip in your scores.
Which is better, an unsecured credit card or a secured credit card?
There’s no one-size-fits-all answer. Unsecured cards may offer more rewards and higher credit limits. If you’ve already built good credit, an unsecured card may be the right fit. But if your goal is to establish or build credit, a secured card might be the best option. And they can be easier to get approved for.
Key takeaways: Unsecured credit cards
An unsecured credit card doesn’t require a security deposit and offers access to a revolving line of credit. It may offer benefits like cash back or travel rewards that can help you make the most of your purchases. Having higher credit scores can make it easier to qualify for an unsecured card with better terms. But there may still be unsecured card options for people with fair credit or who are building credit.
If you’re ready to explore card offers, you can compare Capital One credit cards and check whether you’re pre-approved with no risk to your credit scores.
