What is the difference between a secured credit card and an unsecured one?

Secured or Unsecured Credit Card

With a regular credit card, the issuing bank or financial service provider lends you or your business money and takes on all the risk that you might default. When a secured credit card is issued, that risk is eliminated.

A small business secured credit card is only issued after the customer makes a cash collateral deposit. This sum then becomes the credit limit for the card in question. For example, if you place $1500 in the account, then you can run up charges of up to that amount.

The holder is still required to make minimum monthly payments, as with a regular credit card, and in the case of a default the bank will still attempt to recover the debt before eventually making use of the collateral.

Secured or unsecured credit cardsSecured credit cards are popular with both small businesses and individuals, particularly those who are just starting out and don’t have the kind of credit history required to get access to a regular credit card. In many cases, a secured card may be the only option available.

Unsecured cards tend to have a far lower APR and charge fewer fees. While a secured card may come with an activation fee and annual subscription, these things are generally absent from unsecured cards. In most cases, the ultimate goal of a secured card holder is to upgrade to an unsecured card once their credit rating reaches high enough.

This can not only cost less in the long run but will also lead to the security deposit being refunded. Some providers even pay interest on the deposit while it is being held.

Careful research is recommended before choosing a company as some unscrupulous ones have been known to charge the cost of the security deposit to the card itself, leaving the holder with no available credit limit and months of high interest repayments ahead.

Dozens of fantastic deals are available online. It is always worth doing as much research as possible to ensure you find the secured credit card that is just right for you and all your small business needs.

Filed under Secured Business Credit Card by #

Leave a Comment

Fields marked by an asterisk (*) are required.