The Difference Between Secured and Unsecured Credit Cards – Types of Credit Cards Explained

Having the ability to use credit cards is very important in today’s economy and way of life. However not everyone can get approved for a card and these people are frustrated. However what many of them fail to realize is that there are types of cards that almost anyone can get approved for, these are called secured credit cards. Never heard of them? Well keep reading to find out how they can help you if you keep getting denied!

The Difference Between Secured and Unsecured Credit Cards

On a standard unsecured account eh money that the lender borrows you is unsecured. This basically means that it you default on your accounts and stop making the payments the lender has not collateral to seize from you. They can however p the account into collections and even take you to court over the balance. If it goes to court you can wind up with a judgment against you.

On a secured account the card will be guaranteed with a cash deposit that you will give to the lender and they will hold in escrow. This cash is then used if the borrower fails to make payments and defaults on their account,if you close your account you get your money back less any balance owed. Typically the balance on these cards and the deposit required is only a few hundred dollars, but the card will function exactly the same as a normal account would. And in a lot of cases the lender will switch the account over to a regular one within a years time as long as you a re a good customer, your money will be refunded if they do this for you.

Why Use a Secured Credit Card

Many times these types of accounts are used by people with bad credit who cannot normally obtain a standard charge card account. the cash deposit makes approval for these people almost guaranteed because the lender really has no risk associated with the loan. And when used in a responsible manner the accounts can really drive your FICO scores up fast and help you to re establish yourself financially as well as lay a foundation for your credit rating to build on.

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