Secured vs Unsecured Credit Card | Which to Choose?

Secured vs unsecured credit card options can be confusing to navigate for first-time applicants.

Likewise, the requirements for obtaining both secured and unsecured cards can be confusing if you are not a resident of the country where you want to apply.

In this article, weโ€™ll look at the differences between secured vs unsecured credit card options. Plus, weโ€™ll look at the process to obtain cards, and when both options might be a better option to consider.

This article is part of our free series on credit basics, ranging from how to get a credit card with an ITIN number to answering questions like what increases loan balance.

Feel free to use the table of contents to jump ahead to the sections most relevant to you.

Table of Contents

  1. Secured vs Unsecured Credit Card
  2. How Do Secured Credit Cards Work?
  3. Who Can Apply For Secured Credit Cards?
  4. Who Can Apply For Unsecured Credit Cards?
  5. How to Apply For Credit Cards?
  6. Frequently Asked Questions
  7. Ready to Explore Your Options?

Secured vs Unsecured Credit Card

The main difference between a secured credit card and an unsecured credit card is that secured credit cards require a deposit to be held at the bank at all times while an unsecured credit card does not require a deposit to be held at the bank.ย 

In most cases, individuals apply for secured credit cards when they do not have a sufficient credit history or they are applying for a credit card in a country where they have no credit history at all. On the other hand, unsecured credit cards can be obtained by individuals with a credit history in the country where they are applying.

Not surprisingly, secured credit cards are also used by individuals with poor credit that want to rebuild their credit history. This is possible because maintaining a secured balance at a bank eliminates the financial risk that the bank takes on by issuing a card to the applicant.

Likewise, secured credit cards are a favorite option for foreigners and non-residents looking to establish credit in a new country. However, itโ€™s important to note that not all banks issue secured credit cards. And, even fewer issue them to foreign non-residents.

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How Do Secured Credit Cards Work?

Secured credit cards work very similarly to debit cards. In fact, secure credit cards are more like debit cards than unsecured credit cards because the cardholder is limited to the amount that they keep in the bank account. That said, at the end of each month, the cardholder does have to pay a secured credit card and ensure that a sufficient balance is maintained at the bank.

How Can I Build Credit?

Using a secured credit card to build a credit history is one possible strategy. In fact, it is an accessible strategy for both local individuals and foreigners. This is because most banks that issue secured credit cards have few hesitations about issuing a card. In other words, if an individual is eligible to open a bank account and successfully completes account opening, they will likely be able to obtain a secured credit card as well.

Who Can Apply For Secured Credit Cards?

Who can apply for secured credit cards ultimately depends on the bank that you are considering. This is because every bank sets its own account opening requirements for bank accounts and credit cards.

Applying For a Secured Credit Card

When applying for a secured credit card certain banks may require a local tax identification number while other banks will not. Likewise, certain banks may open accounts for foreign non-residents while other banks will not.

In all cases, whether you can apply for a secured credit card with a specific bank depends on the bank, the branch, and even the banker that you apply to.

Who Can Apply For Unsecured Credit Cards?

Who can apply for unsecured credit cards is much more straightforward than secured credit cards. This is because unsecured credit cards require an applicant to have a reasonable credit history in the jurisdiction where they are applying.

Applying For an Unsecured Credit Card

When applying for an unsecured credit card, the applicant will need reasonable credit history in the country where they want to apply, they are generally unable to obtain an unsecured credit card. That said, there are certain exceptions depending on the person, which we outline in our members-only report on US credit cards.

How to Apply For Credit Cards

How to apply for credit cards will ultimately depend on the type of card that you want to apply for, your credit history in the country youโ€™re applying in, and your client profile. All of these factors, and the client profile that you have.

With this in mind, itโ€™s important to consider all of the account opening requirements for both a bank account and a secured credit card before applying. Otherwise, you could end up spending considerable time and money applying at banks where you cannot open an account or obtain a credit card.

If you are looking for assistance in determining which banks you are able to apply to and successfully open, consider GlobalBanks USA. GlobalBanks USA is our personal US account opening service, which we share below.

Frequently Asked Questions

Below are three of the most common questions that we receive from people looking into secured vs unsecured credit cards. If you have further questions you would like answered, donโ€™t hesitate to get in touch with us directly.

Is an Unsecured Card or Secured Credit Card Better?

An unsecured credit card and a secured credit card can both be better for different people. In fact, in certain instances, applicants may not have a choice but to obtain a secured credit card. However, if you are eligible for an unsecured credit card, they typically offer more benefits and allow for higher spending limits.

How Do Secured Credit Cards Work?

Secured credit cards work like a cross between a traditional debit card and a credit card. This is because the cardholder has to maintain a balance in their bank account that is higher than the amount they can spend with a debit card. However, they also need to pay the card off every month like a credit card.

Should Your First Credit Card Be Secured or Unsecured?

Whether your first credit card should be secured or unsecured depends on your circumstances. This is because certain people can get similar benefits to a secured card by simply getting added to someone else’s credit card as an authorized user. This approach of being added as an authorized user can offer other benefits, including rewards points for you and the main card holder as well as higher spending limits overall.

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GlobalBanks USA is a 100% personal account opening solution. It provides direct access to our team of US banking experts.

When you join, you receive…

+ Expert suggestions on where to open US bank accounts.

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And “yes!” GlobalBanks USA helps foreigners and non-resident individuals open accounts.

In fact, GlobalBanks USA even helps non-resident US LLCs and foreign & offshore entities.

Use the link in our menu above to learn more about GlobalBanks USA. Or, contact us directly with any questions!

 

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GlobalBanks Team
GlobalBanks Team

The GlobalBanks editorial team comprises a group of subject-matter experts from across the banking world, including former bankers, analysts, investors, and entrepreneurs. All have in-depth knowledge and experience in various aspects of international banking. In particular, they have expertise in banking for foreigners, non-residents, and both foreign and offshore companies.

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