Secured vs Unsecured Credit Cards: Is There a Difference?

Banks offer many types of credit card and you as the client get to choose the most suitable type for your needs and financial circumstances, with the credit card being the best solution that can cover any quick financial emergency that you may go through, such as replacing your broken mobile, or buying a laptop... etc.

If you decide to apply for a credit card, we will tell you the two most popular types and how to apply!

 

1- Secured credit card - guaranteed by a savings certificate:

If you choose this type, you will need to deposit a certain amount in the bank as an investment certificate which the bank will use as collateral for your credit card. 

In this case the collateral acts as the bank’s insurance policy in case you miss your credit card payments. The investment certificate is used as collateral for a specified duration, and in the meantime, you still have to pay your credit card payments – preferably on time so you don’t get issued a fine- otherwise the bank may use the certificate’s interest to pay the credit card debt and may even break the certificate to pay off the debt.

More details:

• The credit card is guaranteed by the certificate, which means in worst-case scenario if you are unable to pay your credit card balance for several months in a row the bank can withdraw the overdue amount from the original amount of the certificate and cover the credit card debt.
• A secured credit card’s incentives are exactly like a regular credit card.
• The credit card limit can be up to 90% of the certificate value. 
• You can't break the certificate unless you cancel the credit card first.
• The interest rate is lower in this type of credit card because you can use the interest from the certificate to pay your credit card balance.
• Applying for a secured credit card is faster because you are already a client at the bank.

“The interest rate for unsecured credit cards is higher if you are late in paying your credit card balance.

2 – Unsecured credit card - guaranteed by income:

This type of credit card is aimed at people whose I-Score/credit history is good, meaning they don’t have a bad history of paying credit card or loan installments. In this case the credit card is not guaranteed by a certificate or a specific sum of money but is linked to your source of income.

 

Details:

 

• If you are late in paying the credit card balance, the accrued interest rate is higher than that of a secured credit card.
• You can use the credit card while traveling or to transfer money with little interest without having a balance at the bank.
• The application process takes longer because the bank has to review your information, payroll data, and credit history.
• The credit limit is restricted by your income, meaning that the maximum card limit can be double – or triple in some banks- your salary.

Don’t miss our article on visa cards, 10 credit card secrets banks won’t tell you about!

You can now apply for a credit card through Faydety from the comfort of your own home!