Contrasts are Important: Secured Versus Unsecured Credit Cards
Contributed by Alix Mcmurray
Contrasts are Important: Secured Versus Unsecured Credit Cards
A regular credit card is by its nature an unsecured means of indebtedness. An unsecured debt is one which does not involve collateral, and typically, credit cards do not. Thus to call a credit card unsecured is quite like saying a blue-eyed person has eyes the color of the sky. This is not an unforgivable redundancy, but a contrast may be in order to bring home the importance of "unsecured" versus "secured" when it comes to credit cards.
Securing the Typically Unsecured Credit Card
Secured credit cards have been on the rise in recent years with the burgeoning credit repair movement. Secured credit cards are a viable option for first-time credit consumers (with no credit history) and for people with poor credit histories.
Orchard Bank is a frequent backer of such cards, which typically require the establishment of a savings account as collateral for the card. The funds in the savings account function much like prepaid minutes on a cell phone account: since you've got the verified funds available up front, there's no danger in being "cut off" without warning.
A secured credit card is therefore quite like a debit card, in that charges are made against existing funds. The difference is that with the secured credit card, the account holder usually has a grace period intervening between the time of the charge and the required payment for that charge. A debit card has no grace period, in that a charge is essentially an instant withdrawal from the customer's bank account.
