Secured and Unsecured Credit Cards: Here are the Differences


The credit card market has been growing at an exponential rate since the Government of India launched the Digital India initiative. Consequently, credit card issuers have also been offering lucrative features and benefits to encourage more individuals to apply for the payment cards.

However, before they apply for a credit card, individuals should keep in mind that financial institutions issue a line of credit to applicants based on their past repayment behaviour and credit score, among other parameters.

Based on the eligibility requirements, credit cards can be classified into two main categories – unsecured and secured credit cards. Understanding the difference between the two types will enable Individuals to apply for a credit card according to their financial standing and eligibility, thus reducing the chances of rejection. Take a look.

Unsecured credit cards

Individuals with a high credit score and clean repayment history can opt for unsecured credit cards conveniently. There are several features and benefits that individuals can avail when they apply for a credit card requiring zero security – 

  • Reward program–

All leading credit card companies offer loyalty programs where users can earn reward points on every purchase with their credit cards. However, the number of reward points can vary depending on the financial institution that issued the card as well as the type of card. For instance, credit instruments like the RBL credit card offer accelerated points per purchase compared to regular cards. 

  • Avail emergency loan –

This facility allows individuals to convert the unutilised limit on their credit cards to avail an emergency loan. Moreover, some financial institutions provide an interest-free period of up to 90 days to help manage the borrowed amount efficiently.

  • Cash withdrawal from ATM – 

Individuals can also withdraw cash from ATM when needed. Some cards like the RBL credit card come with this facility for an interest-free period of up to 50 days. Thus, as the name goes, if an individual repays the withdrawn amount within this period, then no interest will be charged.

  • Conversion to EMIs –

Credit cards like the SuperCard allow individuals to convert their outstanding dues into affordable EMIs. The feature enables individuals to fund the purchase of big-ticket items without straining their finances and deferring their repayment to future.

The card issuer also provides pre-approved offers on credit cards, which reduce the hassles and accelerate the application procedure. Such offers can be availed on other financial products too, like business loans, personal loans, etc. One can check his/her pre-approved offer by providing only name and contact details.

Credit card companies also offer unsecured credit cards in different categories to complement various spending requirements and lifestyle needs. For instance, individuals who travel frequently can apply for a credit card customised to provide frequent flyer miles on hotel bookings, flight tickets, etc. 

Secured credit cards

Secured credit cards are linked to collateral like a savings account or fixed deposits against which lending institutions extend a line of revolving credit to the applicant. In this case, it should be noted that the credit limit on secured credit cards is equal to or less than the value of a cash deposit.

Some of the features of the secured credit cards include – 

  • Since these types of cards are suitable for individuals with a poor credit history, such individuals availing them stand a greater chance of defaulting on payments. Consequently, even though secured credit cards are linked to a cash deposit, the card issuer charges a higher interest rate compared to traditional cards. Hence, one should know how to reduce their credit card interest and save money.
  • Secured credit cards can be availed more quickly because of lenient eligibility parameters. Nevertheless, you must provide sufficient collateral for availing one.

Secured credit cards are suitable for individuals who carry a low credit score. First-time users can apply for a credit card like this to build their credit score by making repayments in time. It will enable them to qualify for an unsecured credit card in the future. Consequently, they should know about the various convenient options to pay their credit card bills.


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