Secured Credit Card vs Unsecured Credit Card
A secured credit card is a real credit card backed by a refundable deposit you make when opening the account — usually equal to your credit limit. An unsecured credit card requires no deposit; the issuer extends credit based on your income and credit history. Secured cards exist mostly to help people build or rebuild credit; unsecured cards are the standard product everyone aims for.
Last reviewed on 2026-04-27.
Quick Comparison
| Aspect | Secured Credit Card | Unsecured Credit Card |
|---|---|---|
| Deposit required? | Yes — typically equals the credit limit | No |
| Approval bar | Low — most applicants approved | Higher — depends on credit and income |
| Builds credit? | Yes — reports to bureaus like any card | Yes |
| Typical APR | High | Varies — wider range |
| Rewards / perks | Limited or none | Common — cashback, miles, sign-up bonuses |
| Deposit refundable? | Yes — when account is closed in good standing or upgraded | No deposit to refund |
| Best for | Building or rebuilding credit | Standard credit needs once score qualifies |
Key Differences
1. The deposit
A secured credit card requires a refundable deposit before the account opens. The deposit usually equals the credit limit; it's held as collateral and returned when the account is closed in good standing or upgraded to an unsecured card.
An unsecured credit card requires no deposit. The credit limit is set by the issuer based on income and credit history.
2. Approval
Secured cards are designed for applicants with thin or damaged credit. The deposit reduces issuer risk, so approval is much more likely.
Unsecured cards are underwritten on credit and income. Premium cards require strong credit; basic ones approve a wider band but still expect some history.
3. Building credit
A secured card reports to credit bureaus the same way an unsecured card does. Used responsibly (low utilisation, on-time payments), it builds or rebuilds a score over months.
An unsecured card builds credit identically. Once you've built enough history, you can usually graduate to one with rewards and better terms.
4. Cost
Secured cards often have annual fees and high APRs. The trade-off is that they exist as a credit-building tool, not a low-cost way to borrow.
Unsecured cards range widely. Many have no annual fee; premium travel cards charge several hundred per year for rewards and benefits.
5. Rewards
Secured cards rarely have rewards programs worth optimising. The point is access to credit, not earning back.
Unsecured cards compete on rewards: cashback rates, travel points, sign-up bonuses, transfer partners. For someone who pays in full each month, the rewards can be meaningful.
6. When you outgrow each
A secured card is usually a stepping stone. After 6–24 months of responsible use, many issuers will refund the deposit and graduate the account to unsecured, or you can apply for an unsecured product elsewhere.
Unsecured cards rarely need to be replaced — instead, people add new ones for rewards or upgrades.
When to Choose Each
Choose Secured Credit Card if:
- Building credit for the first time (recent immigrants, young adults, recent graduates).
- Rebuilding after a bankruptcy, default, or long credit gap.
- Cases where you need a credit card and standard unsecured options decline you.
Choose Unsecured Credit Card if:
- Standard credit needs once your credit qualifies.
- Earning rewards on regular spending.
- Travel benefits, purchase protection, or other card perks.
- Anyone who can be approved for one — almost always preferable for the lack of deposit and better terms.
Worked example
After moving to a new country, someone with no local credit history applies for a secured card with a £500 deposit. The card reports to the bureaus for 18 months of on-time payments and low utilisation, and her score reaches a level where she's approved for a no-fee unsecured card with cashback. She closes the secured card, gets the £500 deposit back, and uses the unsecured card going forward. The secured card did its job.
Common Mistakes
- "A secured card isn't a real credit card." It is. It's a Visa or Mastercard with the same terms; the deposit is collateral, not a balance you spend down.
- "The deposit equals the spending." The deposit equals the credit limit, not how much you spend. You still pay your statement balance each month.
- "Secured cards are forever." They're typically a stepping stone. After 6–24 months of responsible use, you can graduate or move on.
- "Unsecured cards don't require credit." They do — issuers underwrite based on credit and income.
This is general educational information, not personalised advice. See the disclaimer for the full note.