What Is an Unsecured Credit Card?
Unlike secured cards, you won’t need a security deposit to apply
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 an unsecured card, you may have access to other 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 payments can vary from month to month because they’re often calculated based on how much you owe at that time. Paying the minimum on time helps you avoid penalties and fees that can come with missed or late credit card payments.
If you pay only the minimum during a billing cycle, the unpaid portion will carry over to the next billing cycle. 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.
Unsecured Credit Card Qualifications
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.”
Some unsecured cards are only available to people who have good credit scores. Other unsecured cards may be available to people who have less-than-perfect credit. Generally, the higher your score, the more options you might have.
With a higher credit score, for example, you could qualify for higher credit limits or lower interest rates. You may even be able to get a low introductory rate or 0% APR for a limited time when you open the account. Other cards might give you the opportunity to earn rewards like airline miles or cash back.
But remember: Whether you qualify for an unsecured card depends on many different factors—not just your credit reports and scores. And a good credit score 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
When used responsibly, a secured credit card can be a great option for building or rebuilding your credit or establishing credit for the first time. It’s “secured” because it requires a security deposit to open the account.
The security deposit often becomes the card’s credit limit. And 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.
Become an Authorized User
If you have a loved one or someone you trust who has a good credit score, they can add you as an authorized user to their existing account.
Being an authorized user allows you to make purchases. But the primary account holder is ultimately responsible for payments. And depending on whether the card issuer reports authorized users to the credit bureaus, the authorized user’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.
Ready to Apply for an Unsecured Credit Card?
Before you apply for a credit card, it helps to know what cards might be the best fit for you. Monitoring your credit and knowing where your credit stands can help you choose.
With CreditWise from Capital One, you can access your free TransUnion® credit report and weekly VantageScore 3.0 credit score anytime. And it won’t hurt your score. CreditWise is free and available to everyone—not just Capital One customers. You can also get free copies of your credit reports from each of the three major credit bureaus. 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 only requires some basic info—and it won’t hurt your credit score.
Government and private relief efforts vary by location and may have changed since this article was published. Consult a financial adviser or the relevant government agencies and private lenders for the most current information.
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. It may not be the same model your lender uses, but it can be one accurate measure of your credit health. 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.