What Is an Unsecured Credit Card?

What Is an Unsecured Credit Card?

By Charles Joseph | Editor, Financial Affairs
Reviewed by Corey Michael | Senior Financial Analyst

An unsecured credit card is a type of credit card that doesn’t require a security deposit to be approved or to increase your credit limit. When you apply for most credit cards, you’re applying for an unsecured credit card. In many cases, people seeking an unsecured card are generally those who have good to excellent credit and a steady income. It is not linked to a savings account or any other type of collateral. Instead, your credit limit is determined by your credit score, income, and the lender’s confidence in your ability to pay back the debt. Unsecured credit cards usually offer more benefits and rewards than secured ones.

Related Questions

1. What are the benefits of an unsecured credit card?

Unsecured credit cards often have higher credit limits, come with more benefits like reward programs, and can help build your credit score when used responsibly.

2. Can you convert a secured credit card to an unsecured one?

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Yes, some credit card issuers may give you the option to upgrade from a secured credit card to an unsecured credit card after you’ve demonstrated responsible use over time.

3. How can I increase my chances of getting approved for an unsecured credit card?

Maintain good credit habits, like paying your existing credit card balances on time and keeping a low credit utilization ratio. Also, developing a steady income history can increase your chances.

4. Can you be denied an unsecured credit card?

Yes, card issuers can deny your application for an unsecured credit card if you do not meet their requirements such as having a poor credit score or unstable income.

5. Do unsecured credit cards have higher interest rates?

Typically, unsecured credit cards come with higher interest rates compared to secured credit cards because lenders take on more risk due to the lack of collateral. However, the exact rate varies by the individual’s creditworthiness and the specific card terms.