There are two different types of traditional credit cards, secured and unsecured. An unsecured card is one that doesn’t require you to put down a deposit, or prepay for the available funds. The fees associated with an unsecured card are much higher than those associated with secured credit cards, as the risk with secured credit cards is so minimal. When most people think of a credit card, they are thinking of an unsecured credit card with a set limit, interest rate, and associated fees. These cards are given on the basis of credit history and credit score.
There are tons of different kinds of unsecured credit cards, from rewards cards, membership cards, and plain old credit cards. These offer convenient purchasing power, and at times, even provide rewards for the use of a particular card. These cards are great for building and optimizing one’s credit score, as regular purchases on a credit card, along with regular payments show lenders that you are responsible with lines of credit extended to you.
There are many different requirements for qualifying for an unsecured card, all vary a bit depending on the lender, and type of card it is. But generally, you need to have a good credit score of at least 620 or higher, but many have no minimum requirements for applying. More goes into your approval for an unsecured card than just your credit score though. They also look at your overall credit history. They are looking for open lines of credit in good standing, no defaults in recent years, and no negative judgments either.
Those with lower credit scores may still qualify for an unsecured credit card, but their line of credit is likely to be much lower than a counterpart with an excellent credit score, and the interest rate will be higher. Generally speaking, the better your credit score, the higher your credit limit and the lower your interest rate will be. Those with lower credit scores may only qualify for unsecured cards with prohibitively high interest rates, so a secured credit card might be the best option until your credit score is boosted enough to qualify for credit at better terms.
A secured card will still help you build credit, just not to the extent that a traditional card will, and the funds available on a secured card are dependent on how much you put on them. Secured credit cards, with good standing and solid history, can be moved over to an unsecured type of card, whereby a line of credit is extended to you on your previously secured card.