Secured vs. Unsecured Credit Cards: Which type fits your financial needs?


A credit card is a financial tool accessible to many, unlike the common belief that it can only be availed by people with good credit history. You may often wonder if there are many conditions to getting a credit card. However, some credit cards do not require such conditions.

Secured credit card

A secured credit card is issued against collateral, mostly a cash deposit or fixed deposit, similar to a loan. Banks and NBFCs issue secured credit cards against fixed deposits. Secured credit cards work differently from usual credit cards. The credit limit for a secured credit card is determined according to the credit limit.

Typically, the credit limit for a secured credit card is around 75-85% of the total fixed deposit amount. Therefore, your credit limit will be in accordance with your fixed deposit amount. The higher the deposit, the higher the credit limit and vice versa.

Unsecured credit card

An unsecured credit card does not require any collateral or deposits. Banks and NBFCs issue this credit card on the basis of your credit score, credit report, and other factors that determine your creditworthiness. The credit limit for an unsecured credit card is determined by credit score, income, credit utilisation ratio, existing debt etc.

What should you go for?

According to Abhishek Saxena, MD and Co-Founder of Omnicard, “Switching to secured cards provides businesses with a secure and controlled way to manage expenses while ensuring policy adherence. Unlike unsecured cards, secured cards come with preloaded spending limits, offering better budget management and eliminating the risk of overspending.”

“When the funds are preloaded, ensuring better spend management becomes easier than ever. This also helps reduce exposure to fraud and unauthorized transactions. Thanks to these fundamental security features built in, secured cards are an ideal choice for organizations to help optimize financial controls and mitigate risks,” Saxena added.

However, in both cases, you must clear your credit card dues on time to avoid interest and late payment fees, which will, in turn, affect your credit score. Additionally, you should look into your financial health before opting for either.

In conclusion, the reasons for choosing a secured credit card or an unsecured credit card may differ from person to person. People with good credit history can opt for an unsecured credit card, whereas people with poor credit history can choose a secured credit card.

(Note: Using a credit card carries its own set of risks)


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