What are unsecured credit cards

How to Change a Secured to an Unsecured Credit Card

There are two basic kinds of credit cards: secured and unsecured. A secured credit card is backed by collateral, and is used mostly by first-time credit card holders and individuals with bad credit. An unsecured credit card has higher limits and lower interest rates and fees than a secured credit card. By improving your credit score, you can transition more quickly from a secured to an unsecured card. Talk to your financial advisor or creditor or use online resources (Nerd Wallet, Credit Karma, etc.) to find an unsecured credit card — preferably one with low interest and monthly payments — that fits your spending style.

Converting or Replacing a Secured Card Edit

What are unsecured credit cards

What are unsecured credit cards

What are unsecured credit cards

What are unsecured credit cards

What are unsecured credit cards

What are unsecured credit cards

What are unsecured credit cards

Deciding If It’s Time to Change Cards Edit

What is an Unsecured Debt? #instant #credit #card #approval

#unsecured credit card

Learn about unsecured debts — what they are and how creditors can collect on them.

An unsecured debt is an obligation or debt that does not have specific property (like your house or car) serving as collateral for payment of the debt. If you fail to make payment on an unsecured debt, the creditor cannot take any of your property without first suing you and getting a court judgment. (There are a few exceptions to this rule.)

A secured debt, on the other hand, has a piece of property serving as collateral for the debt. If you fail to make payments, the creditor can take the property.

Common Types of Unsecured Debts

Common types of unsecured debts include:

  • most department store and other credit card charges
  • student loans
  • telephone, electric, and other utility bills (except to the extent that you are required to post a deposit)
  • medical bills
  • personal loans that you were not required to execute a security agreement or mortgage to obtain
  • court judgments that have not yet been enforced through remedies such as garnishment or attachment
  • income taxes (unless they are so seriously delinquent that they have gone into collection and become subject to a governmental lien), and
  • back rent (except in states that allow landlord liens).

Most debts are unsecured. The primary exceptions are home and auto loans, which are almost always secured.

Advances on lines of credit can be unsecured claims. Some lines of credit are unsecured, backed only by your promise to repay advances taken against them. Obligations on home equity lines of credit, on the other hand, are typically secured claims (secured by your home).

What Happens If You Don’t Pay an Unsecured Debt?

If you fail make payment on an unsecured debt, the creditor can contact you to try to obtain payment, report the delinquent debt to a credit reporting agency, or file a lawsuit against you. Generally, a nongovernmental, unsecured creditor cannot seize any of your assets without a court judgment.

How Unsecured Creditors Can Get a Court Judgment

To obtain a judgment, a creditor must file a complaint in state or federal court and serve you with a copy (this is the start of the lawsuit). You have the right to file an answer to the complaint and contest the lawsuit before a judgment can be entered.

Remedies Once the Creditor Has a Judgment

Once a creditor obtains a court judgment against you, it can proceed with collection remedies. Collection remedies and procedures are governed primarily by state law. A judgment creditor may, among other things:

  • take your examination under oath to obtain information about your income, other obligations, and assets
  • garnish your wages and bank accounts, and
  • attach and sell real and personal property.

The percentage of your wages that can be garnished varies from state to state. State and federal law also exempt some real and personal property from collection. Creditors cannot garnish or collect from assets to the extent that they are covered by exemptions. Exemptions available to you may protect your home equity, household furniture, pension plans, and other items of property from your creditors’ collection efforts.

Exceptions to the Court Judgment Rule

If you default on a federally-insured student loan, the Department of Education can garnish up to 15% of your disposable income without a court judgment. State and federal tax authorities also may undertake collection remedies without first going to court.

2017’s Best Unsecured Credit Cards for Bad Or Average Credit

The market is flooded with many different types of credit cards such as – store credit cards, premium cards, secured credit cards, unsecured credit cards, debit cards, affinity credit cards, and charge cards, etc. Today, we are going to discuss unsecured credit cards, in detail.

What are unsecured credit cards

What are unsecured credit cards?

It is a type of credit card for which you don’t need to make a deposit for the credit limit. Moreover, there is no requirement to make a deposit in case you are looking to increase your credit limit. Most of the users are quite familiar with this type of credit card .

An unsecured card doesn’t require cash collateral — you can get higher credit limits, lower fees and more valuable rewards than you would with a secured one.

How To Qualify for unsecured credit card?

If you have filed bankruptcy, have bad credit, or have no credit, then you will surely have to face hard times in getting an unsecured credit card. On seeing your poor credit history, most of the creditors will decide not to take the risk of giving you the credit card. On the contrary, a secured card will help you get back on the track and also assist you in having a better credit card.

If you have a secured card, there are chances of converting your card into unsecured credit card and get back your deposit when you make timely payment for a set amount. This time required for the conversion of credit card can vary from card companies but usually, it takes a maximum of 15 months.

All you need is to use your secured card smartly for a minimum of six months, this way you will be improving your chances of getting an unsecured credit card. You can have a joint credit card (unsecured) with one of your family friends or relatives. This way you don’t have to make the security deposit and above all, it will help you to make significant improvements in your credit score.

Secured vs. Unsecured Credit Cards

Fee factor – You can easily find unsecured credit cards having no annual fee. However, on the contrary, for secured credit cards, there is always some amount that you need to pay. Some banks only charge $20 but there are some banks charging processing fee+annual fee+application fee and moreover customer service fee as well. I know you just said WHAT. in your mind. So, this is where unsecured credit cards become your obvious choice.

Convenience – Let us assume you are looking to have a secured credit card, so now if you agree to pay any applicable fee or even the security deposit, you will be approved to have one instantly, no questions asked. On the other hand, for unsecured credit cards, you need to have an impressive credit score. In this case, secured cards get the cake.

Rewards – Unsecured credit cards can be a great choice for all those who are infatuated with the rewards, well I like to admit here that I am too. Alas, secured credit cards don’t offer such rewards. Sounds like the unsecured card is the winner here.

Interest rates – Of late, there has been a considerable rise in the interest rates for everyone. Secured cards have gained a reputation of being unlike the norm, however, as you are backing your card make sure you use along with a security deposit. You can have attractive offers on secured cards than the unsecured cards. So, here secured cards are the right choice for you.

Customer services – Certainly, the quality of service may vary considerably in the industry, but there is one thing i.e. secured cards are made for all those who are facing bad credit. This is the reason most of the issuers don’t give much importance towards offering prompt customer support services. Well, this is where unsecured cards score over secured cards as you can expect instant customer support services. So, the obvious choice here is the unsecured credit cards.

Money management – The blend of unsecured cards and money management issues can have hazardous results. On the contrary, secured cards help you lead your life within your means, since you can spend beyond the security deposit (read as amount).

2017’s Best Unsecured Credit Cards

Let us discuss some of the best unsecured credit cards of 2016

What are unsecured credit cards

Capital One Platinum Unsecured Credit Card

– The name itself has some attraction that makes you have a look at it. It is quite popular credit card amongst the consumers. The company mainly offers this card to all those people having average credit. The best thing about this credit card is that it enjoys identical benefits as the Platinum MasterCard that includes travel accident insurance, auto rental insurance, and various other extended warranties.

You have the option of choosing the payment due date of your choice and you also have around the clock monitoring and have free access to your credit score as well. Moreover, you don’t have to deposit any annual fee but the APR is on a higher side i.e. 24.9%. Nevertheless, the overall terms and conditions of the card make it one of the most preferred unsecured credit cards.

Credit One Unsecured Platinum Visa Card

What are unsecured credit cards

– Probably, one of the key features of this card is that you get to know whether you have qualified, for this card, without influencing your credit score. Credit One also informs about your activities to the three leading reporting bureaus. If you have this card, you also get to earn rewards and receive 1% cash back when you purchase grocery and gas. If you want to keep a track of the payments and the due dates, you can set-up an email or text alert as well. The company is also responsible for tracking your activity in case you surpass your limit, and whenever you register a positive activity, you will get rewarded for that.

Milestone Gold MasterCard Unsecured Credit Card

What are unsecured credit cards

– This is one of the best-unsecured credit cards that you can have for yourself. The credit card takes the responsibility of informing your positive activities to the three top credit bureaus. Two of the key features of this card are that you get to customize the card as per your likings and you get to enjoy online access as well.

You don’t have any provision of earning any reward points, but it does offer Gold benefits that includes extended warranty coverage, roadside assistance, and much more. The APR is at 23.9% and the annual fee that you have to deposit is $35 and $99 entirely depending on what is your credit score look like.

Total VISA Unsecured Credit Card

What are unsecured credit cards

– This credit card is also one of the preferred unsecured credit cards. It comes with instant approval, low balance, and reporting to the three credit bureaus. It does have it’s down with the card offering an APR of 29.99%, a processing fee of $89, and an annual fee of $75.

Indigo Platinum Mastercard Unsecured Credit Card

What are unsecured credit cards

– If you are having a bad credit, this is one of the best-unsecured credit cards you can have. It offers you pre-qualification and it does not get reflected on your credit score and the best part is that it also accepts previous bankruptcy. As and when you qualify for the card, you will have the access to the online account management tools.

First Access Visa Unsecured Credit Card

What are unsecured credit cards

– With this unsecured credit card, you enjoy the access to the card even if you have limited or poor credit history. While applying, you can be rest assured about the privacy and filling the form is quite easy. The best element of the card is that you get to receive a reply within 60 seconds. The company also report to the three major credit bureaus. You need to pay $89 as the application processing fee.

First Premier Bank Classic Unsecured Credit Card

What are unsecured credit cards

– If you are looking for a good unsecured credit card, then this is the right choice for you. The credit card reports the key Consumer Reporting Agencies. The initial credit limit will be $300 and the available credit will be $225. The annual fee that you have to pay for the credit card is $75. There is a one-time payment of $99 that you need to pay for the upfront processing fee. If you fail to make this payment within 85 days, your application will stand canceled.

Advantages and Disadvantages Of Unsecured Credit Cards

  • These cards offer you with a line of credit.
  • There is no need to deposit any security, this makes you stay more liquid.
  • The rewards are more prevalent and well-paid.
  • Such cards allow you to spend beyond your means, which puts you at risk.
  • The approval time takes a considerable amount of time.

So, if you are looking to get yourself an unsecured credit card, the above-discussed information will surely come handy.

Secured Credit Cards vs. Unsecured Credit Cards

When choosing a credit card, it helps to understand the difference between secured credit cards and unsecured credit cards.

These credit cards are treated differently by the major credit bureaus, and they affect your wallet differently as well.

These are credit cards that require you to hold money, as collateral, in an account in order to use the card.

A secured credit card requires that you have some sort of “security” indicating that you will repay the loan. You are charged interest and fees on your purchases, and your payments are reported to at least one credit bureau.

However, the fact that the card is secured means that it isn’t as positive for your credit score.

A secured credit card is normally ideal for those who are trying to rebuild their credit.

If you have had credit problems in the past, you might not be able to get a loan without collateral — and this includes a credit card. A secured credit card will allow you to begin rebuilding your credit and showing that you are ready to adopt responsible behaviors.

It is important that you understand the difference between a secured credit card and a prepaid debit card.

The two can seem very similar, but a prepaid debit card is not a credit card, and your activity and payments won’t be reported to a credit bureau.

If you want to rebuild your credit, a prepaid card is useless; you need to make sure you get a secured credit card.

On the other hand, unsecured credit cards are those that don’t require collateral.

These are the “normal” credit cards that those with fair to excellent credit use. There is no money held in reserve to cover costs if the card balance isn’t paid.

If you have an unsecured credit card, you are considered to have a history that indicates that you are responsible with your money habits.

An unsecured credit card is weighted better in the credit scoring formula than a secured credit card.

This means that you are likely to have a slightly higher score if you have an unsecured card than if you have a secured credit card.

If you have a secured credit card, it is possible for you to switch to an unsecured card.

After six months to a year (depending on your credit and financial situation), your issuer might be willing to switch your secured card to an unsecured card — as long as you have been showing improvement in your credit history.

Even if your secured card isn’t converted to an unsecured card, you can apply for an unsecured card. If your good habits with the secured card have carried through, your credit score might have improved to the point that you will be approved for an unsecured credit card.

Know the difference between a secured credit card and an unsecured credit card.

Be aware that a secured card often comes with high fees and interest rates, and isn’t viewed favorably by credit scoring models. However, a secured card can be instrumental in helping you rebuild your credit. As soon as you can, switch to an unsecured card.

Difference Between Secured & Unsecured Credit Cards

Secured and unsecured cards are similar when you make a purchase.

Credit cards make it more convenient to pay for big-ticket items or cover everyday expenses if you're short on cash. Credit cards can be secured or unsecured; the type of card you qualify for largely depends on your credit. Secured and unsecured credit cards function in a similar way when making purchases. There are, however, a few key differences you should keep in mind before applying for either type of credit card.

With a secured credit card, the card issuer requires a cash deposit, which acts as your collateral. Your credit limit is either the amount of the deposit or slightly less. You might be able to increase your credit line by depositing more money with the card issuer, or it may automatically be increased after you've established a positive payment history. An unsecured credit card requires no initial cash deposit and your card limit is based on your credit history. According to Bankrate, secured credit card limits typically range from $300 to $500. Unsecured credit cards can have limits ranging from several hundred to several thousand dollars.

Your credit history plays a large part in determining which type of credit card you qualify for. If you have a low credit score because of multiple delinquencies, charge-offs or bankruptcy, you might only be eligible for a secured card. A secured credit card might also be your only option if you're just beginning to establish your credit history. With a credit score in the fair to excellent range, you should qualify for an unsecured card. A card issuer might also consider your income and expenses when making the decision.

Secured cards tend to be more expensive in terms of the fees and the annual percentage rate of interest you can expect to pay compared to an unsecured card. Depending on the card issuer, you might have to pay an annual fee, a monthly service fee or an account setup fee to open a secured card. Interest rates also tend to be in the neighborhood of 20 percent or higher. With an unsecured card, the better your credit is the lower your APR will be. Many unsecured cards charge no annual fee at all while others allow new members to waive the fee in the first year.

If you're looking to rebuild bad credit or start building your credit history, a secured credit can be a useful stepping stone to achieving your goal. Secured cards are also a good choice if you're worried about racking up thousands of dollars in debt, because they tend to have much lower credit limits. If you've already established good credit, using an unsecured card gives you more spending power. Certain cards also allow you to earn cash back or rewards points on purchases, which can add up to big savings. With either type of card, you'll have to pay the balance in full each month to avoid paying interest.

Rebecca Lake is a freelance writer and virtual assistant living in the southeast. She has been writing professionally since 2009 for various websites. Lake received her master's degree in criminal justice from Charleston Southern University.

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