Is a Secured or Unsecured Credit Card Best for You?

If you're in the market for a new credit card but have limited credit history, you might be wondering how secured credit cards compare to traditional unsecured ones. Both types of cards have their own unique benefits, so understanding the differences can help you choose the one that’s the best fit for your financial goals.

So, is it better to have a secured credit card, or an unsecured one? The answer depends on your individual financial situation. In this article, Fifth Third Bank breaks down the details of secured and unsecured credit cards, from their benefits and application requirements to spending limits and more.

What is a Secured Credit Card?

It can be challenging to get approved for a credit card if you don't have an established credit history or if your credit score falls into an unfavorable range—typically a FICO score below 580 or a VantageScore under 601, according to Experian. The good news is there's a solution: the secured credit card.

Secured credit cards are great for individuals who are new to credit, have a limited credit history, or need to rebuild their credit after financial setbacks. This type of credit card requires a cash deposit, which is usually comparable to the credit limit you'll receive, as collateral in the event that you default on payments - but is completely refundable if you upgrade to an unsecured card or pay off your balance in full and close your account. For example, if you make an initial $300 deposit, you'll typically be given a $300 line of credit. The maximum amount you can deposit varies by each bank’s secured card, but can be up to $5,000.

This type of credit card is a fantastic tool to build credit with. The Federal Trade Commission emphasizes the importance of paying off credit card balances every month and avoiding maxing out your card, as your activity is reported to the three main credit bureaus (Experian, Equifax, and TransUnion).

Benefits of a Secured Credit Card:

• Look and feel is the same as a traditional card.
• Helps users build or rebuild credit.
• Encourages responsible spending habits.
• Security deposit protection (if the cardholder defaults on payments, the issuer can use the deposit to cover the outstanding balance).
• With the Fifth Third Secured Credit Card, you’ll receive $0 fraud liability, complimentary Mastercard ID Theft Protection™, and the ability to paytouch-free using your digital wallet.

Apply for a Secured Credit Card

The Fifth Third Secured Credit Card is a great option for those looking to build or rebuild their credit. With a refundable security deposit as low as $300, you can start with a manageable credit limit and work towards improving your credit history. This card comes with a $24 annual fee and a variable APR on purchases and balance transfers.

If you're ready to start building your credit, begin the online application process today. Alternatively, if you prefer a more personal touch, you can schedule an appointment at your local Fifth Third branch to get started.

What is an Unsecured Credit Card?

An unsecured credit card is a type of credit card that does not require any form of collateral, such as a security deposit, to establish a line of credit. They’re the most common type of credit card and are typically issued based on the applicant's creditworthiness, which includes their credit history, income, and ability to repay debts. Unsecured credit cards help individuals who have established credit histories and are looking for financial flexibility, convenience, and potential rewards.

Benefits of an Unsecured Credit Card

• No collateral required.
• Helps users build credit.
• Higher credit limits compared to a secured credit card.
• Allows balance transfers.
• Potential rewards and benefits, such as cash back on purchases.
• With the Fifth Third 1.67% Cash/Back Card, enjoy complimentary Mastercard ID Theft Protection™ and pay touch-free using your digital wallet.
• Some unsecured credit cards have lower interest rates and fees compared to secured cards.

Apply for an Unsecured Credit Card

The Fifth Third 1.67% Cash/Back Card is a great option to graduate to from a secured credit card, or if you’re in the market for a new cash back credit card. It offers unlimited 1.67% cash back on purchases, no expiration date to redeem rewards, no annual fees, no international transaction fees, and easy-to-redeem cash back rewards.

Take control of strengthening your credit and begin the online application process, or schedule an appointment at your local Fifth Third branch.

Making the Switch from Secured to Unsecured

Graduating from a secured to an unsecured credit card is an exciting milestone in your financial journey. It signifies that you’ve demonstrated responsible credit use, built a stronger credit history, and are now ready for more flexible credit options. Here are some tips to help you determine when you’re ready to upgrade from a secured to unsecured card:

• Establish a credit score: Your credit score is a key indicator of your financial reliability. Aim for a score of at least 620, as this is generally considered the minimum for unsecured credit cards. Regularly check your credit report to ensure there are no errors and to monitor your progress.
• Always make on time payments: Consistently paying your credit card bill on or before the due date is crucial. Late payments can significantly harm your credit score and may result in fees. Setting up automatic payments or reminders can help you stay on track.
• Pay more than the minimum balance due: While paying the minimum amount due each month keeps your account in good standing, it’s better to pay off your balance in full or as much as possible. This reduces your credit utilization ratio, which positively impacts your credit score, and helps you avoid interest charges.

Apply for a Credit Card with Fifth Third Bank

Applying for a secured credit card is the same as applying for an unsecured credit card. Be prepared to provide your name, birth date, address, Social Security number or ITIN, employment information, and proof of income.

Most secured credit cards will require you to pay your security deposit when you apply, which you can usually pay for with a debit card or a bank account. Don’t have a bank account? Check out checking accounts and savings accounts from Fifth Third Bank!

Once all of this is gathered, you’re ready to

apply for a credit card online!