Credit glossary
Unsecured credit card
A standard credit card with no deposit behind it, where the limit rests on the issuer's review of your credit and income.
Most cards are unsecured. The issuer sets a limit based on your application and credit report, and Regulation Z requires it to consider your ability to make the required minimum payments before opening an account or raising a limit. For people building credit, the usual path runs from a secured card to an unsecured one, sometimes by graduating the same account.
On your report, secured and unsecured cards look much the same: a revolving account with a limit, a balance and payment history, counted in utilization and payment history alike. What differs is the deposit. With no collateral behind it, an unpaid unsecured balance can end in a charge-off and a collection account instead of being covered by a deposit.
Guides that go deeper
- When a secured card graduates, and how to get yours thereGraduating a secured card can keep its history and return your deposit. How that compares with closing the card, the utilization math, and what to ask.
- Secured credit cards, explained: deposits, limits and reportingHow a secured card's deposit, limit and bill fit together, what scoring models see, how small limits inflate utilization, and how to get your deposit back.
- How many credit cards should you have? The math behind the numberFICO publishes no ideal number of credit cards. What matters is what each card does to utilization, account age and recent applications. The math, worked out.
Sources
- 12 CFR 1026.51, Ability to pay, eCFR
- Building credit from scratch (checklist), Consumer Financial Protection Bureau
- How to Switch Credit Cards, Experian
This is education, not legal or financial advice. Spot an error? Tell us and we'll fix it.