What is a Secured vs an Unsecured Credit Card
Last month we broke down key information you need to know before applying for your first Canadian Credit Card and about the pros and cons of various credit cards.
Credit cards are more than just an everyday tool for modern living. They can help you learn independence, show your credit card company how trustworthy you are and can even help you achieve your dreams!
One of the most important things you need to know is the difference between secured and unsecured credit cards. Figuring out what is best for you and your needs can help you master your finances in Canada. So what are the differences between the two?
Secured Credit Cards Require Deposits
The biggest difference between secured and unsecured credit cards is the deposit. Secured credit cards require a deposit in order to secure your credit limit. Your credit limit depends on your security deposit.
This means if you pay a security deposit of $400, you will be able to charge up to $400 on your credit card. The higher your deposit, the higher your credit limit will be.
This also means that if you use a secured credit card you can increase your credit limit at any time, by putting more funds into your deposit.
Unsecured Credit Cards
Unsecured credit cards don’t require a deposit. Your credit card limit for these cards depends on your credit history and the amount you are approved for by the lender.
Building Your Credit Score
Using your credit card for everyday purchases and paying back your credit balance on time, is the easiest way to build your credit score. Both a secured credit card and an unsecured credit card can help you build your credit history. Having a high credit score can help you make big purchases and gain financial freedom.
This is the biggest difference between a credit card and a debit card. All credit cards help build your credit history, as long as you pay your bills on time.
Easy Approval
Secured Credit Cards often have instant or easy approval. This means once you apply for a secured credit card, you are almost always guaranteed to receive your card. With Plastk, you will be instantly approved, once you apply for our card. In order to secure your credit limit, you will have to pay a deposit.
This means getting control of your finances is as easy as 1...2...3!
Unsecured cards often require a specific credit score, good credit history and a range of funds available in your bank account.
Annual Fees
Both secured and unsecured credit cards often have annual fees. This means to use your credit card, you must pay a small maintenance fee to assist your credit card company with everyday operations.
Earns Rewards
Both secured and unsecured credit cards can offer rewards points. While most secured credit cards may only offer cashback, Plastk is the first secured credit card company in Canada that offers Premium Rewards for our cardholders.
This means every dollar you spend helps you earn points that you can exchange for electronics, restaurants or even travel!
It is important to look at the different pros and cons of different credit cards, in order to decide which card is best for you. While some cards have higher monthly fees, their rewards program may outweigh this cost!
Plastk’s Take-Aways
Secured credit cards can be perfect for individuals looking to build their credit score and their financial well-being. This means if you’re a newcomer to Canada, a student or just looking to improve your credit history, a secured credit card may be the best option for you.
As we have seen, there are some differences between a secured credit card and an unsecured credit card, so it is important to think about what you would like to get out of your credit card.