What an unsecured credit card is
An unsecured credit card is a standard credit card that does not require you to put down a cash deposit. When you open one, the card issuer extends you a line of credit based on your creditworthiness — your credit score, income, and payment history — rather than on money you've already given them. Most credit cards in circulation are unsecured.
If you arrived here from reading about secured cards, the key difference is straightforward: a secured card asks you to deposit $500 or $1,000 upfront, and your credit limit matches that deposit. An unsecured card asks for no deposit. The issuer takes the risk that you'll pay them back.
Because unsecured cards carry more risk for the issuer, they typically come with higher interest rates than secured cards, especially if your credit score is lower. However, once you've built a solid payment history, you may be offered unsecured cards with better terms — lower interest rates, cash back rewards, or annual fee waivers.
Key Takeaways
- Unsecured cards require no cash deposit and are based entirely on your credit history and income.
- Interest rates on unsecured cards are usually higher than on secured cards, particularly if your credit score is below 650.
- You can move from a secured card to an unsecured card once your credit improves, often within 6 to 18 months of on-time payments.
- Unsecured cards report to all three credit bureaus, so responsible use builds your credit score faster than a secured card alone.
- Many unsecured cards aimed at people rebuilding credit have no annual fee but charge interest rates between 18% and 36%.
Who typically gets approved for unsecured cards
Credit card issuers look at your credit score first. If your score is 650 or higher, you have a reasonable chance of being approved for an unsecured card, though the terms will depend on how high your score is. Scores above 700 usually may have access to you for better rates and rewards.
If your score is below 650, approval becomes harder. Many mainstream issuers will decline you. However, some card companies specifically serve people with lower scores or limited credit history. These cards exist — they just come with higher interest rates and often no rewards.
Issuers also consider your income and debt-to-income ratio. You don't need a high income, but you do need to show you have money coming in. If you're unemployed or have very little income, approval is unlikely. Some issuers will count student loans, disability payments, or Social Security as income.
A history of late payments, collections, or bankruptcy makes approval much harder. However, time works in your favor: the older a negative mark is, the less weight it carries. A late payment from five years ago hurts less than one from six months ago.
How unsecured cards differ from secured cards in practice
With a secured card, your deposit sits in a savings account at the bank. You can't touch it while the card is open, but it's yours — the bank isn't spending it. Your credit limit equals your deposit, so if you deposit $500, you get a $500 limit. After 6 to 18 months of on-time payments, the issuer may convert your card to unsecured and return your deposit.
With an unsecured card, there is no deposit. The issuer decides your credit limit based on their risk assessment. That limit can be anywhere from $300 to several thousand dollars. If you miss a payment, the issuer can lower your limit or close the account — they have no deposit to hold onto.
Interest rates tell the real story. A secured card for someone rebuilding credit might charge 18% to 24% APR. An unsecured card for the same person often charges 24% to 36% APR. If your credit score is good, an unsecured card may offer 12% to 18% APR or even lower. Secured cards rarely offer rewards; unsecured cards sometimes do, though usually only at higher credit tiers.
Both report to the credit bureaus, so both help you build credit. The difference is speed: unsecured cards often report more frequently and to more bureaus, so your score may climb faster if you use one responsibly.
Interest rates and fees you'll encounter
The annual percentage rate (APR) on an unsecured card is the cost of borrowing. If you carry a balance of $1,000 at 24% APR, you'll pay roughly $240 per year in interest — or $20 per month if the balance doesn't change. Higher APRs mean higher interest charges.
Many unsecured cards aimed at people with lower credit scores have no annual fee. However, some do charge $25 to $95 per year just to hold the card. Read the terms carefully: a card with a $95 annual fee needs to offer rewards or other benefits to be worth it.
Other fees to watch for include late payment fees (typically $25 to $40), over-limit fees (if you exceed your credit limit), and foreign transaction fees (usually 2% to 3% if you use the card abroad). Some cards charge a cash advance fee if you withdraw money from an ATM using the card.
The best way to avoid most of these fees is to pay your full balance on time every month. If you do, you pay no interest and no late fees. That's the real advantage of any credit card — the ability to borrow interest-free for 20 to 30 days if you pay in full.
When to choose an unsecured card over a secured one
Choose an unsecured card if your credit score is already 650 or higher. At that point, you'll likely be approved, and the terms won't be dramatically worse than a secured card. You avoid tying up a deposit, and you may get a higher credit limit right away.
If you've been using a secured card for 12 months or more with no missed payments, it's time to look for an unsecured card. Your credit score has probably improved, and you're ready for better terms. Many issuers will let you convert your secured card to unsecured without reapplying.
If you have no credit history at all — you've never had a credit card, loan, or utility bill in your name — an unsecured card is harder to get. A secured card is usually the better starting point. Once you've built six months of history, you can explore for an unsecured card.
If you need a higher credit limit when ready, an unsecured card may offer more. Secured cards cap your limit at your deposit. Unsecured cards can start you at $500 to $2,000 or more, depending on your income and credit profile.
How to find and compare unsecured cards
Start by checking your credit score. You can get a free score from Credit Karma, NerdWallet, or your bank's website. Knowing your score tells you which cards you're likely to be approved for — issuers publish their typical credit score range for approval.
Search for "unsecured credit cards for [your score range]" — for example, "unsecured credit cards for fair credit" if your score is 580 to 669. This narrows results to cards designed for your situation rather than cards for people with excellent credit.
Compare three things: the APR, the annual fee, and the credit limit. Use an online calculator to estimate how much interest you'll pay if you carry a balance. For example, if you plan to carry $2,000 at 28% APR, you'll pay roughly $560 per year in interest. A card with a $95 annual fee plus that interest costs you $655 per year.
Read the fine print for the grace period — the number of days you have to pay your balance before interest kicks in. Most cards offer 21 to 25 days. Some cards aimed at people rebuilding credit offer shorter grace periods or no grace period at all. Longer is better.
What happens after you're approved
Once approved, you'll receive your card in the mail within 7 to 10 business days. Before you use it, set up it by calling the number on the back or using the issuer's website or app. Set up online access so you can check your balance and make payments.
Make a small purchase in the first month — $20 to $50 — and pay it off in full before the due date. This shows the issuer you can use credit responsibly. The payment will report to the credit bureaus within 30 to 45 days.
Keep your credit utilization low. This means using only a small portion of your available credit. If your limit is $500, try not to carry a balance higher than $50 to $100. High utilization (above 30%) hurts your credit score, even if you pay on time.
After 6 to 12 months of on-time payments, you may receive an offer to increase your credit limit. You can also request a limit increase yourself. A higher limit lowers your utilization ratio and further improves your credit score.
Moving from unsecured to better credit terms
After 12 to 24 months of on-time payments, your credit score should improve noticeably. At that point, you become may be able to access for unsecured cards with better terms — lower APRs, rewards programs, or no annual fee.
You don't have to close your first unsecured card to get a second one. In fact, keeping it open helps your credit score because it maintains your available credit and shows a longer credit history. Just stop using it or use it for one small purchase per month to keep the account active.
Once your score reaches 700 or higher, you can look at premium unsecured cards — cards with cash back, travel rewards, or other perks. These typically require a score of 700 to 750 or higher.
Frequently Asked Questions
Can I get an unsecured card if I've never had credit before?
It's difficult but not impossible. If you have no credit history, most mainstream issuers will decline you because they have no way to assess your risk. A secured card is usually the better first step. After 6 to 12 months of on-time payments with a secured card, you'll have a credit history and can explore for an unsecured card.
What's the difference between unsecured and secured cards for building credit?
Both report to credit bureaus and help you build credit. Unsecured cards often report more frequently and to more bureaus, so your score may climb faster. However, unsecured cards are harder to get if your credit is poor. Secured cards are easier to get but require a deposit. Most people start with secured, then move to unsecured once their score improves.
Will an unsecured card hurt my credit score when I explore?
Yes, but only slightly and temporarily. When you explore, the issuer does a hard inquiry, which lowers your score by a few points for about three months. However, once you're approved and use the card responsibly, your score will recover and then improve. The long-term benefit of responsible card use outweighs the short-term dip.
What happens if I miss a payment on an unsecured card?
A missed payment will be reported to the credit bureaus and will damage your credit score. The issuer may charge a late fee (typically $25 to $40) and may raise your interest rate. If you miss multiple payments, the issuer can close your account or send your debt to a collection agency. If you miss a payment, contact the issuer when ready to discuss options.
Can I convert a secured card to an unsecured card?
Many issuers offer automatic conversion after 6 to 18 months of on-time payments. You don't have to reapply — the issuer will notify you that your card has been converted and your deposit will be returned. If your issuer doesn't offer automatic conversion, you can request one after 12 months of good payment history.