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What is a Secured vs. Unsecured Credit Card? contents
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What is a Secured vs. Unsecured Credit Card?

Last Updated: October 23, 2024
6 min read
Getting a credit card

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Key Points:

  1. Secured cards look and act like a traditional credit cards except that you provide a refundable security deposit equal to your credit limit.

  2. Unsecured credit cards (traditional cards) require a higher credit score and more income to qualify than secured cards.

  3. Secured cards might have a higher interest rate and a credit limit cap equal to your deposit amount.

A credit card can help you reach new financial heights by allowing you to build credit with responsible use. Depending on where you are in your credit journey, you may qualify for a secured or unsecured credit card. Both cards let you make purchases with credit and require you to make a minimum monthly payment toward your balance, but there are distinct differences.

One primary difference is that a secured credit card (often issued to those with little to no credit history or bad credit) requires a refundable security deposit. This protects the lender if the borrower defaults on their loan. Unsecured credit cards do not require a security deposit.

Qualifications for a secured vs. unsecured credit card

Whether you’re looking for your first credit card or you’re more experienced with credit, specific qualifications determine what you qualify for.

Income

All credit cards require some level of income to qualify. But because they come with a lower credit limit and require a deposit, income requirements for a secured credit card are often lower than requirements for unsecured cards. Either way, issuers will look at your monthly income to determine what credit limit you can comfortably afford. You might have trouble getting either card if you don’t have enough income.

Age

All borrowers must be 18 or older to apply for a credit card in their name. This applies to both secured and unsecured cards.

Age also impacts credit card income requirements. According to the Federal Trade Commission, the Credit CARD Act of 2009 says borrowers between 18 and 20 years old must prove they can pay their debt independently. Independent income can include income from a job, regular allowances, and left-over scholarship or student loan funds. Borrowers 21 and older can include household income (like the income from a spouse) when applying for credit.

Credit history

Your credit history is a record of your borrowing and repayment activity over time. Lenders look at your history to review your late or timely payments, the debt you owe, and more. These factors determine your credit score (a three-digit number that quantifies your report). Responsible activity can improve your credit score, and borrowers with good credit scores are more likely to qualify for an unsecured credit card.

Did you know?

Borrowers with little, poor, or no credit history may struggle to qualify for a traditional, unsecured credit card. But credit card companies may not even need you to have a credit score to apply for a secured credit card. There’s no credit score required to apply for a Discover it® Secured Card.1

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Features of a secured vs. unsecured credit card

Secured and unsecured credit cards come with features that can vary by the credit card issuer and type of card.

Credit limits: Because secured credit cards are for those with little credit (or poor credit), the credit limits are often lower than unsecured cards. For a secured credit card from Discover, your credit line will equal your deposit amount, starting at $200 up to $2,500.2 The credit limit on a traditional credit card can start in the hundreds but span well beyond—it will depend on your income and credit history.

Interest rates: Factors like credit history determine the interest rate for any credit card. The better your credit score, the lower your interest rate may be. Because of this, secured credit cards usually come with higher interest rates than unsecured cards.

 

A lower rate can lead to smaller interest payments if you carry a balance. However, when your credit card company offers a grace period, you’ll never pay interest on regular purchases if you pay your balance in full (and on time) each month, no matter the card type.

Rewards: Depending on a credit card company’s rewards program, secured and unsecured credit cards may offer cash back rewards. For example, the Discover it® Chrome Gas & Restaurant Credit Card and the Discover it® Secured Credit Card both let you earn 2% Cashback Bonus® at gas stations and restaurants on up to $1,000 in combined purchases each quarter, automatically.3

Fees: Whether you have a secured or unsecured credit card, you might have certain fees based on how you use your credit card. Credit card fees might kick in when you make a cash advance, balance transfer, late payment, or foreign transaction. Your credit card issuer determines fees, so they may vary by card in both the type and the amount. Some credit cards may also include an annual fee (an amount borrowers pay annually to use their card). Discover has no annual fee on any of our cards.

Secured Credit Card Unsecured Credit Card
No credit history required Established credit history required
Security deposit required No security deposit required
Lower credit limit Higher credit limit
Higher interest rate Lower Interest rate
Reward options exist, but are less generous More rewards & cards to choose from
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Is a student credit card a secured or unsecured card?

Student credit cards are typically unsecured cards, but most require proof of college enrollment to qualify. While you may need a good credit score and income to be eligible for a traditional credit card, student credit cards have more lenient requirements tailored to those with limited income and credit history.

But like secured credit cards, student cards often start with lower credit limits, giving new cardholders a chance to use credit responsibly but with less risk of taking on too much debt. Unlike a secured card, they don’t require a deposit.

Many student credit cards also offer rewards that can help students with everyday expenses. With Discover® student credit cards, you can earn cash back rewards and build credit with responsible use,4 and there’s no credit score required to apply.5

Graduating from a secured to an unsecured credit card

Secured credit cards offer a stepping stone to more financial freedom. For some creditors, after several on-time payments, secured cardmembers may get their deposit back and upgrade (graduate) to an unsecured credit card account. Usually, the card’s account number, benefits, and rewards will remain the same. With the Discover it® Secured Credit Card, you can upgrade to an unsecured card after six consecutive on-time payments and maintaining good status on all your credit accounts.6

Whether new to credit or well into your borrowing years, secured and unsecured credit cards offer features and benefits that can help you improve your borrowing potential and bolster your financial health. Understanding how they differ can help you decide which is the best credit card for you.

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  1. No Credit Score Required (Secured Card): Based on 2023 Discover it Secured credit card application data, applicants without a credit score may qualify. You must meet other applicable underwriting criteria. When we evaluate your creditworthiness, we consider all the information you provide on your application, your credit report, and other information. If you have a credit score, we may use that in our evaluation.

  2. Minimum Security Deposit: If approved, you must make a minimum security deposit of $200 (or more, in increments of $100 up to $2,500), which will equal your requested credit limit. Discover will determine your maximum credit limit by your income and ability to pay.

  3. You earn a full 2% Cashback Bonus® on your first $1000 in combined purchases at Gas Stations (stand-alone), and Restaurants each calendar quarter. Calendar quarters begin January 1, April 1, July 1, and October 1. Purchases at Gas Stations and Restaurants over the quarterly cap, and all other purchases, earn 1% cash back. Gas Station purchases include those made at merchants classified as places that sell automotive gasoline that can be bought at the pump or inside the station, and some public electric vehicle charging stations. Gas Stations affiliated with supermarkets, supercenters, and wholesale clubs may not be eligible. Restaurant purchases include those made at merchants classified as full-service restaurants, cafes, cafeterias, fast-food locations, and restaurant delivery services. Purchases must be made with merchants in the U.S. To qualify for 2%, the purchase transaction date must be before or on the last day of the offer or promotion. For online purchases, the transaction date from the merchant may be the date when the item ships. Rewards are added to your account within two billing periods. Even if a purchase appears to fit in a 2% category, the merchant may not have a merchant category code (MCC) in that category. Merchants and payment processors are assigned an MCC based on their typical products and services. Discover Card does not assign MCCs to merchants. Certain third-party payment accounts and digital wallet transactions may not earn 2% if the technology does not provide sufficient transaction details or a qualifying MCC. Learn more at Discover.com/digitalwallets. See Cashback Bonus Program Terms and Conditions for more information.

  4. Build credit with responsible use(Student): Discover reports your credit history to the three major credit bureaus so it can help build your credit if used responsibly. Late payments, delinquencies or other derogatory activity with your credit card accounts and loans may adversely impact your ability to build credit.

  5. No Credit Score Required: Based on the preceding 12 months of Discover Student credit card application data, applicants without a credit score may qualify. You must meet other applicable underwriting criteria. When we evaluate your creditworthiness, we consider all the information you provide on your application, your credit report, and other information. If you have a credit score, we may use that in our evaluation. Not having a credit record may impact your approval odds.

  6. Getting your deposit back: Monthly reviews start your seventh month as a customer. We will refund your security deposit if you have made all payments on time for the last six consecutive billing cycles on all your Discover accounts including any loans, and you've remained in "good status" on all credit accounts you are responsible for whether they are Discover accounts or not. "Good status" means: (1) your credit report shows no delinquencies, charge-offs, repossessions, or bankruptcies for the six months prior to our review; and (2) your Discover secured card is not in a prohibited status at the time of our review, including, but not limited to: closed, revoked, suspended, subject to tax levy, garnishment, deceased, lost/stolen, or fraud. Monthly reviews may be delayed if you change your payment due date. We typically process your refund in 2-3 business days based on your delivery preference. If you close your account and pay in full, we'll return your deposit within two billing cycles plus ten days.

  • Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.