Unsecured credit cards have been around for a long time. In fact you may even own a couple of these credit cards and not even know it. In this article I am going to cover what an unsecured credit card is and how it can be a big advantage to you.
What Is An Unsecured Credit Card
An unsecured credit card is a card that is not backed by any kind of asset. For example a secured credit card would be backed by a deposit account. Another way to think of it is your home. If you take out a mortgage and you fail to make the payments the bank will come take the asset which in this case is the house.
With a card that is unsecured it is not backed by any type of asset. It is only backed by the good will and faith that you will pay back what you borrowed. Think of it like a line of credit except not back by anything.
I currently have two of these cards and have found them very useful to have. One is a gas card through MasterCard which gives me 5% back on all of my gas purchases through marathon gas stations.
The card is not backed by any type of asset but as long as I continue make my payments on time I will continue to receive the benefit of paying less for my gas. Not a bad deal.
Benefits Of An Unsecured Credit Card
Here are several benefits of owning an unsecured card.
- Line of credit based on credit history. With a home your value is determined by the value of the home. Therefore it is only worth as much as the home is worth. With an unsecured card if you credit is great then you’ll get a higher credit line and if your someone who has poor or bad credit then your credit line will be a lot less.
- Fewer fees being unsecured. Secured cards tend to have higher fees but if your someone who is looking for an unsecured credit card for bad credit you will be happy to know that you will find better deals and pay less in fees with them.
- Build your credit up. With unsecured cards you will be able to build your credit history up better. If you keep your card paid off on a regular basis your credit score will go up because you are proving to the credit card companies that you can manage your money. Better yet you are doing it under the good will that it’s not backed by an asset unlike secured debt.
How To Get An Unsecured Credit Card
First off, I just want to point out that when you apply for unsecured credit card that you’ll want to make sure that you look at all the deals, fees, and interest rates to make a good decision. I personally like the method CreditCards.com uses to apply for a card. They have information on hundreds of cards and the basic one stop shop.
- Search. Look for the card you want. This site has hundreds of different cards to look at everything from the instant unsecured credit card to the best unsecured credit card.
- Compare. In this step you will be able to compare cards side by side and look at everything from fees to rewards they offer. This makes the whole process a lot easier.
- Apply. After comparing you can even apply right online through a secure connection without wasting any time at all.
Using this method is a lot easier than sifting though several credit card applications in the mail and allows you to get all the offers out on the table. With the right unsecured credit card you can build your credit and be on your way to achieving fiscal fitness.
This article was recently featured on the Carnival of Personal Finance by A Gai Shan Life.