When people basically took off a credit card they do not know that they are actually talking about an unsecured credit card. Just like we have secured and unsecured loan we have secured and unsecured credit cards. But most people do not know the meaning of an unsecured credit card. But in this article today we are going to be taking a look at what is an unsecured credit card.
Even though you are actually holding an unsecured credit card you might not know what an unsecured credit card means. This article today is going to throw more light on it so that you will know if it is the best option for you or not. Also for people with limited options, you are going to know today if getting a secured or an unsecured credit card actually works for you.
What is an Unsecured Credit Card?
You are probably holding an unsecured credit card right now if you are reading this article because most credit card that is in consumers’ hard is actually an unsecured credit card. They are not secured because the credit extends you a line that you can draw on and pay off debt or make payments each month without you putting forward any form of collateral in case you feel to make this payment.
In other words, an unsecured credit card is a credit card that you do not provide collateral for when applying for it. But the issue has still to be granted you this credit card after determining whether you will pay it back or not. If you are very much likely to pay back then will be granted an unsecured credit card. Credit card issuers take a look at different factors to Grant unsecured credit cards to customers.
How Does an Unsecured Credit Card Work?
After you have applied for an unsecured credit card the credit card issuer will pull up your credit report to determine your creditworthiness. If the credit card issuer is satisfied with the information you are application will get granted. Unlike an unsecured credit card you will definitely need collateral in order for you to get approved for here you do not need collateral.
Making use of an unsecured credit card I had the transaction to your balance which has to be paid off monthly. Any month that you do not pay what you use in a credit card becomes a debt that you need to pay off and attracts late payment fees and other penalties. They’re paying your entire balance in a month does not attract any interest on your credit card which is a good use of a credit card.
Pros and Cons of an Unsecured Credit Card
There is always a good and bad side to everything which means that there is definitely a good and a bad side to an unsecured credit card which is listed below:
Pros of an Unsecured Credit Card
- You do not have to make a deposit for collateral which means that you do not require collateral to get an unsecured credit card. Your creditworthiness is based on other factors in your credit history.
- You always have access to low-interest rates and a better reward program when you apply for unsecured credit.
- One of the best advantages of an unsecured credit card is the fact that you are less likely to have many fees to deal with. Most unsecured credit cards come with low fees or avoidable fees.
Cons of an Unsecured Credit Card
- It becomes difficult to get an unsecured credit card because your creditworthiness is determined by other factors in your credit history. Such as your credit score and others.
- Because it is an unsecured credit card you might miss using it because it becomes easy to spend beyond your limits or beyond what you can pay back. This is what basically leads to spending beyond what you can pay back and get into credit card debt.
Who Should get an Unsecured Credit Card?
When considering an unsecured credit card if you know you will qualify for one then there are many scenarios where an unsecured credit card can be beneficial to you. If you have good credit or excellent credit an unsecured credit card might be a good idea for you in order to continue improving your score. This is because it is very important that you have a good credit score.
An unsecured credit card can also help in case of an emergency which is a great choice for keeping up with payments and expenses that will come up. If you are someone that is looking for various kinds of rewards such as travel rewards and others then an unsecured credit card should be your number one choice. This is because they offer various types of one depending on the credit card you go for.
How do I Apply for an Unsecured Credit Card?
Apply for an unsecured credit card is easy all you need to do is to determine the credit card with the right reward and every other feature you need. Once you have seen the credit card you want to apply for simply head over to their website and apply online. If you qualify for the credit card and the credit card issuer is satisfied with your report then your application will be granted.
Is an unsecured credit card a good option?
The answer is yes and an unsecured credit card is a good option if you are looking for rewards and other types of benefits. For those also looking to pay low fees to maintain a credit card then an unsecured credit card becomes a must for you. It also gives you the ability or the option to be approved for a higher credit limit when you use an unsecured credit card.
What is the difference between a secured and an unsecured credit card?
The major difference between a secured and an unsecured credit card is basically the collateral. In a security guard, equilateral is needed which is usually going to be your credit limit in a secured credit card. But in an unsecured credit card, there is no collateral needed your creditworthiness is determined by your credit history.