Unsecured Credit Cards

By: Odysseas Papadimitriou, WalletHub CEO
Given that no security deposit credit cards are what most people refer to when they use the generic term “credit cards,” there are, of course, many different kinds. Unsecured credit cards vary on a number of levels, including their target consumer market (e.g. business, student), their specific features (e.g. rewards, 0% APR) and the minimum credit standing required for approval (e.g. good credit, fair credit). One type of card that may lead to some confusion is what’s known as a partially unsecured credit card. These cards, which we list on the Secured Credit Cards page, may require a security deposit that is smaller than the credit line that you get (the Capital One Secured Credit Card is a good example).

So, with all of the different types of credit cards with no security deposit, you may be wondering which is best. The list of “best unsecured credit cards,” changes constantly and varies based on both your credit standing and needs. Therefore, checking out our Editor’s Best section could be a great starting point.

By: John Kiernan, Personal Finance Editor
Whether or not you should apply for an unsecured credit card depends on your credit standing:

Damaged Credit: If you have damaged credit, your focus should really be on rebuilding your credit standing. Aside from the fact that unsecured credit cards for bad credit might not even be available, secured cards are much better suited to accomplishing this objective for three reasons: 1) They are much easier to get approved for, since they require a security deposit; 2) The security deposit makes high fees unnecessary and secured cards thereby cheaper alternatives; 3)The fact that the security deposit equals your credit line makes it impossible to spend beyond your means.

Limited Credit: From a credit card company’s perspective, people with limited or no credit history can be put into one of two groups: students and everyone else. The focus of anyone with limited or no credit should be building credit as inexpensively as possible. With this in mind, whether the card is secured or unsecured doesn’t really matter and college students should focus their search on no annual fee student cards, while everyone else should check out all of the no annual fee credit cards for limited credit.

Good or Excellent Credit: Pretty much anyone in this category should opt for an unsecured credit card, given that the rewards, interest rates and lines of credit simply cannot be matched by secured cards.

By: Odysseas Papadimitriou, WalletHub CEO
The new credit card law (the CARD Act) has made it generally not profitable for credit card companies to offer unsecured credit cards to people with bad credit. The reason for this is that the law prevents issuers from charging fees that total more than 25% of a card’s credit limit during the first year. Since it is difficult to manage the inherent risk involved with offering unsecured cards to people with bad credit without these fees, most companies have ceased doing so. Nevertheless, you might want to check back from time to time in order to see if a new unsecured credit card offer has been added to our database.

By: John Kiernan, Personal Finance Editor
For people with the highest credit scores, the economic landscape does not affect the overall availability of unsecured credit card applications but does impact the terms that are offered. During times of financial hardship, interest rates rise and rewards fall. During times of financial recovery, credit card companies are very competitive in their pursuit of the most exemplary consumers and offer initial rewards bonuses and 0% introductory interest rates as part of their courtship.

On the other hand, the economy dictates whether unsecured credit cards for fair or limited credit history are available at all. When times are tough, issuers become more conservative and usually do not wish to incur the added risk of offering credit cards with no security deposit to unproven consumers. During those times, secured cards are the only option available.