Secured vs. unsecured credit cards: What’s the difference?

Different credit cards are targeted at different audiences. Some are best for travel, for example, while others are great for groceries. 

One distinction between types of credit cards is secured vs. unsecured credit cards. Here’s how each of them work, and how to choose what’s right for you and your small business. 

The main difference between a secured vs. unsecured credit card

The two main differences between a secured credit card and an unsecured credit card are:

1. Who can qualify. It’s easier to qualify for secured credit cards than unsecured credit cards. 
2. How to qualify. The reason it’s easier to qualify is because the secured card requires a security deposit that acts as collateral for any charges made on the card. 

We’ll dive into both of these differences in more detail, explain which type of card is right for what type of individual or small business, and even suggest an alternative that doesn’t require a deposit. 

Bad credit vs. good credit in relation to credit cards

Most credit card issuers check personal credit when you apply for a credit card. That’s often true regardless of whether the card is a consumer credit card or a small business credit card.

Unsecured cards usually require good to excellent personal credit scores. Secured cards are more flexible. They are often available to someone with a limited credit history (a.k.a. “credit invisible”), as well as someone with poor credit. 

An unsecured credit card is a card with a limit based mainly on your credit score. (Income also plays a factor.) You can use it however you want, then pay off that balance at the end of the pay period. Sometimes unsecured cards charge interest if you carry a balance over to the next pay period. 

It’s called an unsecured card because you’re not using any type of collateral to “secure” approval and usage of the card. Instead, a lender pulls your credit report and/or credit score to see if your creditworthiness is strong enough to be a responsible credit card user.

How does a secured credit card work?

If you don’t have strong credit and want to start improving your credit score, using a secured card may help. 

With a secured card, you’ll need to place a cash deposit with the issuer. Once you’re approved for a secured credit card, you’ll have a specific amount of time to fund your deposit. Most issuers have a minimum deposit requirement of at least $200—$500, or higher for some business secured cards. Your deposit will usually be held in a savings account and may earn a little interest. 

Often your deposit will determine your credit limit. Make a deposit of $250, for example, and you will get a card with a credit limit of $250. (A few issuers offer initial lines of credit that are larger than the amount of the deposit.) 

The issuer typically holds on to your deposit for as long as you have the card, though a few issuers may offer the opportunity to graduate to an unsecured card. 

You can use your secured card anywhere that brand of card is accepted. If the card carries a Visa logo (or Mastercard logo), for example, you can use it anywhere Visa (or Mastercard) is accepted. You can use your secured card like an unsecured card on purchases at the grocery store, dining out, gas stations and online shopping. 

You can only spend up to your credit limit, unless your issuer allows you to spend more than your limit. If your deposit is relatively small and your limit is low, you’ll need to carefully watch your spending. 

Most secured credit cards report payment activity to the three major credit bureaus: Experian, Equifax, and TransUnion, though you should always double check. If you want to build credit, you need a card that reports payments to major credit reporting agencies.

You’ll get a statement from your credit card issuer, and you’ll be required to make payments by the due date. Most cards let you make minimum payments, in which case you’ll pay interest, or pay your statement balance in full to avoid interest. 

Interest rates on secured cards are often high. Avoid carrying a balance on a high-rate card if at all possible. 

If you’re worried about getting into credit card debt and paying interest, it’s perfectly fine to limit your purchases. You could, for example, only use the card when you fill up at the gas station, or use it to pay for an online streaming subscription. This approach can help you keep the card active while keeping your spending in check.

A secured card is not a prepaid card. A prepaid card is like a gift card. You load money onto the card and every time the card is used, the amount of money available on the card goes down. It’s not linked to any bank accounts and prepaid cards typically aren’t reported to the major credit bureaus. This means they won’t help you build your credit.

Before signing up for a secured credit card, check out:

• Annual fees: Some secured credit cards charge an annual fee. Not all do. This is an added cost and you may be able to avoid it by shopping around. 
• Interest rates: Secured credit cards tend to have higher interest rates than unsecured credit cards. Remember that interest charges are usually charged when you carry a balance from month to month, as most cards offer a grace period. If you can’t pay your statement balance in full by the due date, interest charges will be applied.
• Credit bureau reporting: Building credit is one of the main reasons for using a secured credit card. If an issuer doesn’t report payments to the major credit bureaus, keep looking for one that does.
• Minimum deposit requirement. How much do you need to deposit to open the account? Will you have the option to upgrade to an unsecured account?

After paying your secured credit card on time for at least six months, or perhaps longer, you might be able to increase your credit limit beyond your security deposit. A few cards even let you apply to graduate to an unsecured credit card and get your security deposit back. 

Some issuers will only give you your deposit back after you’ve closed your card and paid off any balance due. 

How does an unsecured credit card work?

An unsecured credit card doesn’t require a security deposit. You’re approved based on your credit history, income and other factors. You can use your card anywhere that type of card is accepted. 

Qualifications for an unsecured credit card

Some of the best credit cards require excellent credit, while others require fair or good credit. This means you might be approved for some unsecured credit cards, but not others, depending on your credit and other qualifications. 

Consumers with strong credit scores often qualify for higher credit limits on unsecured cards. 

Your interest rate for an unsecured credit card is also often tied to your credit score. Consumers with better credit scores tend to qualify for lower interest rates. While you might be able to get an unsecured credit card with fair credit, for example, you’ll probably get that card with a higher interest rate than someone with good or excellent credit. 

You can use an unsecured credit card like you would use any other credit card. Many of these cards offer the ability to earn rewards with your purchases. Cash back rewards and travel rewards are the two most popular types of rewards programs. 

Once you make your purchases on your credit card, you’ll need to make payments. You’ll get a monthly bill showing your balance due. Often you can choose to make minimum payments and pay interest, or avoid interest charges by paying the statement balance in full. 

Most issuers report payments on consumer cards to the major credit bureaus, Equifax, Experian and TransUnion. 

Business credit cards often report to business credit bureaus. On time payments can help your credit scores, and missed payments hurt your credit scores. 

Before applying for a new credit card, review your options, including:

• Fees: Is there an annual fee for using the card? Is there a late payment fee if you don’t pay on time? Is there a foreign transaction fee if you use the card for purchases outside the U.S.? Unsecured cards tend to have lower and fewer fees compared to secured credit cards, but not always. 
• Rewards: Are there perks? A few unsecured credit cards don’t offer much in the way of rewards or benefits, but many do. 
• Requirements: What’s the minimum credit score you need to qualify? You can check your FICO and VantageScore credit scores for free. Also, check to see if the issuer discloses income or other requirements to get the card. 

What do secured and unsecured credit cards have in common?

When comparing both secured and unsecured credit cards, there are a few things both types of credit card accounts often have in common: 

• Build credit: If you choose cards that report to the major credit bureaus, both secured and unsecured credit cards can help you build credit. With that being said, missing payments or high levels of debt (credit utilization) use can hurt your credit scores.
  Note: Personal credit cards are typically reported to consumer credit bureaus and can help build a personal credit history, while business credit cards typically report to business credit bureaus and may help build business credit. But issuer policies may vary so be sure to check. 
• Wide acceptance: Again, cards that carry branding from American Express, Discover, Mastercard or Visa are widely accepted both in the US and overseas. 
• Easy application process: For both types of cards, you can apply for them online and often get a decision within a few minutes. Applying is often fast, convenient and easy. 
• Safer payments: Thanks to federal law that helps protect cardholders from fraudulent purchases on your credit cards, this is the safest way to pay for purchases.

When to use a secured card vs. an unsecured card

For most people, the choice between a secured card is fairly simple. If you qualify for an unsecured card, it may be the logical choice. If you don’t, a secured card can provide valuable benefits while you work on establishing or reestablishing your credit history, and boosting your credit scores. 

How to apply for a secured credit card

Applying for a secured card is similar to applying for an unsecured card. You’ll fill out an application—usually online—and provide information about your identity, including your Social Security number, so the issuer can check your credit. You’ll also provide information about your personal finances, including household income. 

You may need to provide the deposit when you apply, or within a certain time frame after approval. You will usually provide your bank account details so the amount of the deposit can be automatically transferred from your account. 

If you apply for a business secured card, you’ll also need to provide information about your business, such as your business name and address, Employer Identification Number (EIN) and business revenue. 

If approved, you’ll get a card you can begin to use for purchases. 

Top secured credit cards of 2026

Here are options to consider for both business and personal secured credit cards. 

Top business secured cards

Bank of America Business Advantage Unlimited Cash Rewards Mastercard Secured credit card

This secured business credit card from Bank of America requires a minimum deposit of $1000 to open. There is no annual fee, and it has a surprisingly robust rewards program for a secured card. You can earn unlimited 1.5% cash back on eligible purchases with no cap. You can redeem cash rewards as a credit card statement or as a deposit into your Bank of America bank account—checking or savings. 

There is no annual fee, but there is a foreign transaction fee of 3%. 

Bank of America will automatically review the cardholder’s credit history, and customers who pay on time and meet other qualifications may be able to transition to an unsecured card. Bank of America business credit cards generally report to SBFE.

*All information about the Bank of America Business Advantage Unlimited Cash Rewards Mastercard Secured credit card has been collected independently by Nav. This card is not currently available through Nav. To see what business credit cards are available, please visit the Nav Credit Card Marketplace.

Business Edition® Secured Mastercard® Credit Card

First National Bank offers a business secured card with a credit limit between $2,000 and $100,000, in multiples of $50. Your security deposit must be 110% of the credit limit that you want, however you will earn interest on the deposit. There are no rewards points or miles to earn, but there are perks such as Mastercard Easy Savings (automatic rebates on certain purchases) and discounts on Quickbooks Online or TurboTax. There is an annual fee of $39.

*All information about the Business Edition® Secured Mastercard® Credit Card has been collected independently by Nav. This card is not currently available through Nav. To see what business credit cards are available, please visit the Nav Credit Card Marketplace.

Union Bank® Business Secured Visa® Credit Card

Union Bank has offered a secured card for small business owners with a limit of as little as $500 and as much as $25,000 in the past. However, this card is not currently open to new applications. 

*All information about the Union Bank® Business Secured Visa® Credit Card credit card has been collected independently by Nav. This card is not currently available through Nav. To see what business credit cards are available, please visit the Nav Credit Card Marketplace.

Wells Fargo Business Secured Credit Card

You may see references online to this credit card, as it was a popular option for business secured cards. However, it is no longer available as of October 2022.

Best personal secured credit cards

Make payments on time and keep balances low on a personal secured card to help build or rebuild your personal credit history and improve your credit score. 

Here are some personal secured credit card offers to consider:

Citi Secured Mastercard

If you are approved for this card, make a security deposit of $200—$2500. Your deposit equals your credit limit. This card also offers free access to your FICO score online. There is no annual fee.

*All information about the Citi® Secured Mastercard® has been collected independently by Nav. This card is not currently available through Nav. To see what business credit cards are available, please visit the Nav Credit Card Marketplace.

Discover It Secured Credit Card

This personal secured card from Discover features no annual fee and a minimum deposit requirement of $200. Your credit limit will equal your deposit. After 7 months, Discover will begin reviewing your account to see if you are eligible to convert to an unsecured credit card and get your deposit back. 

*All information about the Discover It Secured Credit Card has been collected independently by Nav. This card is not currently available through Nav. To see what business credit cards are available, please visit the Nav Credit Card Marketplace.

Platinum Secured Credit Card from Capital One

This personal credit card from Capital One features a refundable minimum security deposit of  $49, $99 or $200. There’s no annual fee for this card and Capital One will automatically start reviewing your account after 6 months to see if you qualify for an unsecured card. There is no annual fee.

*All information about the Platinum Secured Credit Card from Capital One has been collected independently by Nav. This card is not currently available through Nav. To see what business credit cards are available, please visit the Nav Credit Card Marketplace.

Secured Self Visa ® Credit Card: The new way to build credit

Secured Self Visa offers a unique way to build credit through a Credit Builder Loan, which can then be used to obtain a secured card. There’s no hard credit check. Your payments will be reported each month to credit bureaus. Once your Credit Builder Loan is paid off, you unlock the money you’ve saved in a CD (minus interest).

Start Building Credit

The secured Self Visa ® Credit Card: The new way to build credit

Terms, Rates & Fees

Helps business owners build personal credit. No hard credit check.

Pros

• No hard pull on your credit

Cons

• Minimum monthly payments required

Intro APR

N/A

Purchase APR

27.49% Variable Rates

Annual Fee

$0 annual fee for the first year only, $25 annual fee thereafter. Variable APR of 27.49%. Offer valid for new customers only.

Welcome Offer

N/A

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How to upgrade to an unsecured credit card

Some card issuers offer the option of upgrading to an unsecured credit card if you maintain an on-time payment history and meet other qualifications. .

Here are three ways to help ensure you can upgrade your card:

1. Understand the issuer’s policies for upgrades. If this option is available, the minimum qualifications will usually be spelled out. 
2. Set automatic payments. Make sure you at least make the minimum payment on time each month. Late payments may disqualify you from upgrading. 
3. Monitor your credit scores. Keep tabs on your credit scores so you understand what lenders see. 

Depending on the card you choose, you might automatically get upgraded to an unsecured credit card and have your deposit refunded. 

Regardless of when you upgrade, there are steps you can take to help build your credit. Spend strategically and stick to your business budget. Do your best to keep balances low and pay off your full balance every month whenever possible. If you must carry a balance, try to pay it off as quickly as you can to minimize interest. 

Final word: Secured vs. unsecured credit cards

Beginning your credit journey isn’t always the smoothest ride. You might not be able to get the first card you set your sights on, but that doesn’t mean you won’t be able to get any card.

Secured cards can be a solid option for building your credit history, but ultimately most small business owners will want to get to a point where they can qualify for a card without a security deposit. 

A secured card can be one way to build better credit. The longer you pay on time, keep your credit usage low, and avoid carrying high balances, the more likely your credit score will continue to improve. 

Frequently asked questions

What are unsecured credit cards?

Unsecured cards are cards that do not require a security deposit to qualify. The reason they are called “unsecured cards” is because there is no collateral required. 

What is the lowest credit score for an unsecured credit card?

A minimum credit score of at least 650 (fair credit) is required for many credit cards, and some issuers require credit scores of at least 720 (excellent credit) or higher. If you have a low credit score, you may need to consider a secured card. 

What are the risks of unsecured credit cards?

The biggest risk with credit cards is the risk that you charge more than you can afford to pay back, and wind up making minimum payments and paying high interest charges, or even miss payments and your credit scores go down. 

Is a student credit card a secured or unsecured card?

Student credit cards are typically unsecured. However, students can also often get secured cards if they are trying to build their credit history. (While on-time student loan payments can help build credit, those accounts are installment loans. Credit cards offer revolving accounts, which are another type of account that can also help build a credit history.)