What is an unsecured credit card?

Is a credit card secured or unsecured? Don’t let the term “unsecured” throw you. When you think of a typical credit card, you’re probably thinking of an unsecured credit card.

So why the name? Unlike a secured credit card, an unsecured card can offer a line of credit without the need for a security deposit. And if you qualify for a credit card with no deposit, you may have access to perks that might not come with a secured card.

How unsecured credit cards work

Like all credit cards, unsecured credit cards offer revolving credit. A revolving credit line is open ended, which means it doesn’t have an end date. The line of credit can be used and paid down repeatedly as long as the account remains open and in good standing.

The line of credit has a credit limit, which is the maximum amount of credit extended to you. And you’ll be required to make minimum payments each billing cycle. Those minimum monthly payments can vary from month to month because they’re often calculated based on how much you owe at that time.

Making on-time payments helps you avoid penalties and fees that can come with missed or late credit card payments. It can also affect your credit scores. For credit scoring company FICO®, payment history makes up 35% of your score.

If you pay only the minimum during a billing cycle, the unpaid portion will carry over to the next billing cycle on your card account. And you’ll accrue credit card interest. But you can typically pay less interest by paying more than the minimum or paying your balance in full.

Keep in mind that issuers sometimes charge an annual fee for unsecured credit cards. Always check the terms that apply when considering an unsecured credit card.

Unsecured credit cards for different credit scores

There are many different factors that determine whether you qualify for an unsecured credit card.

Your credit reports and credit scores are a couple of those factors. That’s because your credit reports and scores give lenders insight into your credit activity and current credit situation. And as the Consumer Financial Protection Bureau explains, “A credit score predicts how likely you are to pay back a loan on time.”

Good and excellent credit scores

Consumers with higher credit scores may find that they have more options for credit cards than those with lower credit scores. Good credit scores typically result from responsible behaviors, such as making payments on time and not applying for more credit than you need. 

Some unsecured cards are only available to people who have good credit scores, which range from 670 to 739 according to FICO. Good scores from VantageScore® may be between 661 and 780. But it’s important to remember that lending decisions are ultimately up to credit card issuers, not credit-scoring companies.

Fair credit scores

If you have less-than-perfect credit, you may be wondering what options you have for unsecured credit cards. 

Unsecured cards may be available to people who have what might be considered fair credit. Fair credit scores can vary based on credit-scoring models and the credit-scoring companies that calculate them.

FICO scores that are considered fair usually range from 580 to 669. VantageScore’s fair range typically fall between 601 and 660. Using credit responsibly by doing things like paying down debts and avoiding late payments can help you improve your credit scores

Poor credit scores

Don’t fret if your credit is considered poor—there still may be credit cards that fit your needs. And with responsible use, you can use them to build your credit. Just be aware that your options may be more limited. 

Benefits of an unsecured credit card

So what are the advantages of having an unsecured credit card? With higher credit scores, for example, you could qualify for higher credit limits or lower interest rates. You may even be able to get a low introductory rate (intro APR) or 0% APR for a limited time when you open the account. Other cards might give you the opportunity to earn travel rewards like airline miles and other travel expenses or cash-back rewards.

But remember: Whether you qualify for an unsecured card depends on many different factors—not just your credit reports and scores. And having good credit scores doesn’t guarantee that you’ll be approved for an unsecured credit card.

Other credit card options

You might not qualify for an unsecured credit card if you have poor credit or no credit history. But you may still have options. And if they’re used responsibly, these options could help you build credit over time so that you can eventually qualify for an unsecured card.

Consider a secured credit card

You may be wondering what the difference is between a secured and unsecured credit card. When used responsibly, a secured credit card can be a great option for rebuilding credit or establishing credit for the first time

It’s “secured” because it requires collateral in the form of a security deposit to open the account. The security deposit often becomes the card’s credit limit. And as long as it’s used responsibly, it’s usually refundable—you might get it back if you pay your balance in full and close the account, for example. In some cases, it could be returned even earlier if you spend responsibly and pay your monthly statements on time.

Once you’ve been approved for a secured credit card and made your deposit, you can use the card to make purchases in stores or online—just like you can with a traditional, unsecured credit card.

And with responsible use, you may eventually be able to upgrade to a secured card

Become an authorized user

If you have a loved one or someone you trust, they can add you as an authorized user to their existing credit account as a way for you to build or rebuild credit.

Being an authorized user allows you to make purchases. But the primary account holder is ultimately responsible for payments. And depending on whether the credit card issuer reports authorized users to the credit bureaus, both the authorized user and primary account holder’s credit could be impacted by how responsibly the account is managed. Plus, there’s generally no credit check or need to apply in order to be an authorized user.

Some issuers, like Capital One, may also provide online access for eligible authorized users. Just remember, access alone won’t help you build credit. 

Ready to apply for an unsecured credit card?

Before you check to see whether you’re pre-approved or apply for a credit card, it’s a good idea to know where your credit stands. Monitoring your credit can help with that.

CreditWise from Capital One lets you access your free TransUnion® credit report and weekly VantageScore 3.0 credit score. And it won’t hurt your credit. CreditWise is free and available to everyone, whether or not you have a Capital One card. 

You can also get free copies of your credit reports from each of the three major credit bureaus: Experian®, Equifax® and TransUnion. Visit AnnualCreditReport.com to learn how.

Another way to help you find the right fit? Pre-approval or pre-qualification. And with Capital One’s pre-approval tool, you can find out whether you’re pre-approved for some of Capital One’s credit cards before you even apply. It’s quick and requires only some basic information—and it won’t hurt your credit scores.

We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.

Your CreditWise score is calculated using the TransUnion® VantageScore® 3.0 model, which is one of many credit scoring models. Your CreditWise score is a good measure of your overall credit health, but it is not likely to be the same score used by creditors. The availability of the CreditWise tool depends on our ability to obtain your credit history from TransUnion. Some monitoring and alerts may not be available to you if the information you enter at enrollment does not match the information in your credit file at (or you do not have a file at) one or more consumer reporting agencies.

CreditWise Alerts are based on changes to your TransUnion and Experian® credit reports and information we find on the dark web.

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