Unsecured credit

What is an unsecured credit card?

An unsecured credit card is just another name for a “regular” credit card. Unsecured means that the debt on the card is not backed by or secured by collateral. All the lender has is your promise to pay it back.

With traditional loans, you have to offer something as collateral to reduce the risk to the lender that you will not pay back the money. A car loan or home loan, for example, is backed up against the car or the house itself. If you fail to make your payments, a pension man will come to take your car or the bank will foreclose the house. Go to a pawnshop and put your old guitar for cash – same concept. You can get your guitar back when you pay off the loan. Keep the money and the pawnshop sells the guitar. Loans with collateral are said to be secured.

Unsecured credit cards, however, have no collateral requirement. The card issuer just has to take your word for it that you will pay for the purchases you make. This is why unsecured cards are difficult to obtain if you have bad credit or no credit history. Your credit history is basically a record of how well you kept your promises to repay the borrowed money. If you don’t have a good track record (or all history) in this area, lenders will be reluctant to lend you money.

Since the vast majority of credit cards are unsecured credit cards, you don’t hear the word much except when it comes to distinguishing Insecure cards secured credit card.

As the name suggests, are backed by guarantees. You must deposit a cash security deposit to open an account, and this deposit is usually equal to your credit limit. Since you cannot charge more on the card than what you have deposited, the risk to the lender is minimal. If you don’t pay your credit card bill, the lender can take your deposit. This is why secured credit cards are a popular option for people with .

Most popular credit cards are not guaranteed. You usually need good to excellent credit to qualify for unsecured credit cards with the richest rewards or the lowest interest rates. Good credit is generally defined as a credit score of 690 or better.

A grade below good credit is fair credit, also known as “average” credit. The credit score range for fair credit is approximately 630 to 689. There are a number of excellent unsecured cards for fair credit, including some that offer rewards, do not charge an annual fee, or charge them. of them.

Are there any unsecured credit cards available for people with Wrong (629 and less) credit? Yes, but we generally don’t recommend them. Unsecured cards for people with bad credit tend to charge exorbitant fees for small lines of credit. It’s not uncommon to see an annual fee of $ 99 on unsecured cards, plus a monthly maintenance fee, as well as an application and processing fee, all to get a $ 200 credit limit. In a year or two, those fees can easily exceed the minimum deposit of $ 200 or $ 300 you owe on a secure card. And unlike secure card deposit, you don’t get these fees back.

Finally, several issuers have started offering unsecured credit cards to people who have no credit history, good or bad. Instead of focusing on credit scores and credit reports, these issuers can assess applications by looking at income, occupation, bank account balances, and even things like where a candidate went to. university and what he studied.


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