Secured vs Unsecured Credit Cards: 2025 Guide to Choosing the Right Card for Your Credit

Choosing between a secured credit card and an unsecured credit card is one of the most important decisions when building or rebuilding your credit. Both card types can help establish financial stability, but they work differently and serve different purposes. This comprehensive guide covers everything you need to know about secured and unsecured credit cards in 2025, including detailed explanations, advantages, disadvantages, how they affect your credit score, and how to choose the best card for your situation.

What Is a Secured Credit Card?

A secured credit card requires a refundable security deposit that usually becomes your credit limit. For example, if you provide a $300 deposit, your credit limit will generally be $300. The deposit acts as collateral for the card issuer and reduces their risk.

How Secured Credit Cards Work

You provide a cash deposit upfront, usually between $200 and $1,000 depending on the issuer.
The bank holds this deposit as collateral until you close the account or upgrade to an unsecured card.
You use the card like a regular credit card to make purchases and pay your balance monthly.
Your payment activity is reported to the three major credit bureaus — Experian, Equifax, and TransUnion — helping you build credit.
If you close the card in good standing or upgrade, your deposit is refunded.

Secured cards are often recommended for:

People with no prior credit history
Individuals recovering from bankruptcy or financial difficulties
Those looking to rebuild damaged credit

For an official explanation, see the Consumer Financial Protection Bureau’s guide to Secured Credit Cards.

What Is an Unsecured Credit Card?

Unsecured credit cards do not require a deposit. Approval depends on your creditworthiness, income, and credit history. This is the most common type of credit card available.

Features of Unsecured Credit Cards

No security deposit needed to open the card.
Usually offers higher credit limits than secured cards.
Frequently includes rewards such as cashback, travel points, and sign-up bonuses.
Offers additional benefits like purchase protection, travel insurance, and fraud monitoring.

Unsecured cards are best for people with fair, good, or excellent credit, typically a FICO score above 640.

Learn more about unsecured cards at Experian’s page on Unsecured Credit Cards.

Key Differences Between Secured and Unsecured Credit Cards

Feature	Secured Credit Card	Unsecured Credit Card
Deposit	Required, usually equals credit limit	None
Approval	Easier with poor or no credit	Requires good credit and income
Credit Limit	Typically equal to deposit amount	Varies widely, often higher
Rewards	Limited or none	Common, includes cashback and travel rewards
Fees and Interest	Lower fees than subprime unsecured cards	Wide range; some cards have high fees and APRs
Upgrade Potential	Can graduate to unsecured cards and get deposit back	No upgrade; credit limit increases possible
Best For	Building or rebuilding credit	Established credit and rewards seekers

NerdWallet offers a thorough comparison at Secured vs Unsecured Credit Cards.

Advantages of Secured Credit Cards

Easier Approval
Secured cards are often approved even if you have poor credit or no credit history because the deposit reduces the lender’s risk. This makes them an effective entry point for credit building.
Lower Fees Compared to Subprime Unsecured Cards
Many unsecured cards designed for people with poor credit charge high fees and interest rates. Secured cards often have lower fees and reasonable APRs.
Effective for Building or Rebuilding Credit
Your on-time payments and credit utilization are reported to all three credit bureaus, allowing you to build a positive credit history within months.
Opportunity to Upgrade
After demonstrating responsible use, many issuers allow you to graduate to an unsecured card, refunding your deposit while keeping your credit history intact.

The Federal Trade Commission provides useful information on the pros and cons of secured cards: FTC on Secured Cards.

Disadvantages of Secured Credit Cards

Upfront Deposit Required
The need to put down a cash deposit can be a barrier, especially if you have limited savings.
Lower Credit Limits
Your credit limit is typically tied to your deposit amount, which may restrict your purchasing power compared to unsecured cards.
Limited Rewards and Benefits
Most secured cards do not offer cashback, points, or other perks commonly found on unsecured cards.

Advantages of Unsecured Credit Cards

No Deposit Required
You can open an unsecured card without tying up any cash.
Rewards and Benefits
Many unsecured cards offer generous cashback, travel points, sign-up bonuses, purchase protections, and travel insurance.
Higher Credit Limits
Unsecured cards usually come with higher limits that help improve your credit utilization ratio and increase spending power.
Wide Variety of Cards
Unsecured cards are available for students, travelers, business owners, and cash-back enthusiasts.

For a curated list of top unsecured cards, check CreditCards.com’s Best Unsecured Credit Cards.

Disadvantages of Unsecured Credit Cards

Higher Approval Requirements
Poor credit or limited income can make it difficult to qualify.
Higher Fees and Interest on Subprime Cards
Some unsecured cards designed for applicants with bad credit come with high annual fees, monthly maintenance fees, and high APRs. These cards can be more expensive than secured cards.
Potential for Overspending
Higher credit limits may encourage overspending, increasing debt risk if not managed carefully.

Which Type of Credit Card Should You Choose?

Choose a Secured Card If You:

Have no credit history and want to establish credit.
Have poor credit and want to rebuild your score.
Have recently gone through bankruptcy or major financial issues.
Keep getting denied for unsecured cards.
Want a card with lower fees than some unsecured subprime cards.

Choose an Unsecured Card If You:

Have a credit score of 640 or higher.
Have stable income and responsible credit habits.
Want to earn rewards like cashback or travel points.
Need higher credit limits to lower your credit utilization.
Want cards with more perks and better benefits.

For personalized advice, visit MyFICO’s guide on Choosing the Right Credit Card.

How to Move From a Secured Card to an Unsecured Card

Graduating from a secured card to an unsecured card is a common goal for many credit builders. Follow these steps:

Make On-Time Payments Every Month
Payment history is the most important factor in your credit score.
Keep Your Credit Utilization Low
Aim to keep your balance under 10 percent of your credit limit.
Increase Your Deposit if Possible
Adding to your deposit raises your credit limit and shows responsible credit management.
Use Your Card Regularly but Responsibly
Make small purchases and pay them off on time.
Wait Six to Twelve Months
Most issuers review your account periodically for upgrade eligibility.
Request an Upgrade if Not Automatic
If the issuer does not upgrade automatically, call customer service to ask.

Experian explains upgrading secured cards here: How to Upgrade a Secured Credit Card.

How Secured and Unsecured Credit Cards Impact Your Credit Score

Both types of cards affect your credit score through the same key factors:

Payment History: Timely payments boost your score and late payments harm it.
Credit Utilization: This is the ratio of your balance to your credit limit. Unsecured cards often have higher limits, which can help lower utilization and raise your score.
Length of Credit History: Keeping cards open helps build a longer credit history.
Credit Mix: Having a variety of credit accounts (secured and unsecured) improves your credit profile.
New Credit: Opening new cards results in hard inquiries, which can temporarily lower your score.

For an in-depth look, see FICO’s guide: How Credit Scores Are Calculated.

Common Myths About Secured and Unsecured Credit Cards

Myth 1: You must carry a balance to build credit.
Fact: Carrying a balance costs interest. Pay your bill in full every month to build credit without paying interest.
Myth 2: Checking your own credit score hurts your credit.
Fact: Checking your own score is a soft inquiry and does not affect your credit.
Myth 3: Secured cards do not build credit.
Fact: Secured cards build credit if the issuer reports to the credit bureaus.
Myth 4: Unsecured cards are always better.
Fact: Secured cards can be a smarter choice for beginners or those rebuilding credit.
Myth 5: Secured cards always have high fees.
Fact: Many modern secured cards have low or no fees.

FAQs About Secured and Unsecured Credit Cards

Can I get an unsecured card with bad credit?

It is challenging. Most unsecured cards require fair to good credit. Consider a secured card to build credit first.

How long does it take for a secured card to improve credit?

Typically, you can see improvements in 3 to 6 months with responsible use.

Will my secured card issuer refund my deposit automatically?

Usually, you must request a refund or upgrade. Contact your issuer for their process.

Do rewards on unsecured cards outweigh fees?

If you pay your balance in full monthly, rewards can offset fees. Always compare annual fees to potential rewards.

Final Thoughts

Both secured and unsecured credit cards have a place in personal finance. Secured cards provide a solid foundation for those with no or poor credit to start building a positive credit history. Unsecured cards offer rewards, higher limits, and perks for those with established credit. The right card depends on your credit profile, financial habits, and goals.

With responsible management, either card type can help you improve your credit and achieve financial success in 2025.