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What Is an Unsecured Credit Card?

Last Updated: January 11, 2024

3 min read

Table of contents

How unsecured credit cards work

Unsecured credit card interest rates

What do you need to apply for an unsecured credit card?

Alternatives to unsecured credit cards

Key points about: unsecured credit cards

Unsecured credit cards are the most common type of credit card.
Unlike secured credit cards, unsecured cards don’t require a security deposit.
In order to qualify for an unsecured credit card, you usually need to have some credit history.

Unsecured credit cards are the most common type of credit card. In fact, most of the time, when people apply for a new credit card, they’re applying for unsecured credit. But what does unsecured credit card mean? Consider some basic information to help you understand what an unsecured credit card is and how it works.

How unsecured credit cards work

“Unsecured” in this case means that the debt is not secured by collateral, such as a deposit that the lender or card issuer can keep if you fail to make payments. This type of debt is typically slightly riskier for lenders to issue because it doesn’t require collateral. So, the terms of an unsecured credit card are based on the borrower’s credit rating, ability to pay, application information, and other factors.

Examples of “secured” debt may be car loans or mortgage loans, which are “secured,” or backed by collateral—a house, a car—that helps ensure that the lender can get some of their money back in the event of nonpayment. Unsecured credit card debt has no such requirement.

Unsecured credit card interest rates

Credit card borrowers promise to repay the money, and they pay interest on the debt (unless they pay their full balance each month by the due date). Credit cards tend to have higher interest rates than car loans or mortgages, partly because credit card debt is riskier for banks.

Borrowers who have a good credit score are typically less risky for banks to lend to, so these borrowers tend to get offered a lower interest rate, or annual percentage rate (APR). The same credit card may offer different APRs to applicants based on their credit history, among other factors.

What do you need to apply for an unsecured credit card?

An unsecured credit card may require a higher income level and credit score than a secured card. The exact requirements canvary by credit card issuer, but if you get turned down for an unsecured card, you can apply for a secured card and work on building or rebuilding credit until you qualify for an unsecured card.

While the requirements for approval vary by credit card company, you must be 18 years old to apply for your own credit card in the United States. And if you're under 21, you'll usually need to show the credit card issuer that you have your own source of income. In addition to some financial information, you'll need to provide personal information as well, like your name, Social Security number, date of birth, and more.

Alternatives to unsecured credit cards

Although unsecured cards are the most common form of credit cards, not everyone can qualify for this type of card. If you have limited credit history or are rebuilding your credit, you might want to consider a secured credit card. A secured credit card may give you the ability to borrow only a small amount of money, for which you pay a security deposit up front that typically equals your credit limit.

Did you know?

Over time, as you pay your bills and use your new secured credit card and other loans responsibly, you may rebuild your credit history and get to the point where you’re ready to move on or "graduate" to an unsecured credit card. If you use your Discover it^® Secured Card responsibly, you can get your deposit back after 6 consecutive on-time payments and maintaining good status on all your credit accounts.¹

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