What You Need to Know About Unsecured Credit Cards
Credit cards seem to be one of the most popular financial tools available, next to debit cards, with unsecured credit cards consistently acting as reigning king.
Regardless of your credit history, you have viable credit options available that stem from unsecured, secured, prepaid, and even VISA debit cards. While opinions on credit cards still vary, you might find it difficult to seek out someone who doesn’t have at least one. We’re going to break down unsecured credit cards for you, and get to the heart of what they can do.
What are Unsecured Credit Cards?
Unlike secured credit cards, unsecured cards are ones that don’t require you to make a deposit or put up any type of collateral in order to secure your credit line.
Ultimately, your card acts as a small loan where you only pay interest on what you spend, instead of your entire limit. Your credit rating becomes key in making a decision to grant you credit because there is no security deposit, so should your account fall into delinquency, your lender needs to take alternative collection measures that don’t include taking the security deposit.
Picking Out Unsecured Credit Cards that are Right for You
Understanding your financial stability, and what you can handle is one of the best ways to narrowing down what you’re going to use your unsecured credit cards for. There are more credit cards available than what you probably think, so knowing what to look for, and knowing what you intend to use your credit for are ways that you can narrow your selection down to a few. Let’s look at a few key elements that you’re going to want to consider.
- Annual Fees: Your first instinct may be to lean away from cards that come with an annual fee, but there are plenty of rewards cards that come with perks that outweigh the fee your lender charges each year. Don’t discount unsecured credit cards just because they come with a yearly fee, ensure you’re looking deeper.
- Sign-Up Offers: Many of the credit cards that you’ll look up come with sign-up offers attached to them. Lenders use this method to entice you into requesting their card, and to get you to use one that may have a higher interest rate. Air Miles bonuses are a frequent option that come with credit cards. You will find that upon initial sign-up, creditors are granting miles that can equal to statement credit, and more.
- Annual Percentage Rate, or APR: While considering your card’s annual fee is highly important, you should also be looking at the APR. Your annual percentage rate lets you understand the rate that your current balance is building up interest.
- Rewards: There are two main rewards that come with unsecured credit cards, and those are cash back, and loyalty. Consider your lifestyle, and what would be the most beneficial to you when making the decision between the two. Cashback cards allow you to earn money back based on what you’re spending, while loyalty points build up for every dollar that you spend, regardless of what you’re spending it on.
- Balance Transfer: Transferring the balance of one credit card onto another is a method that’s commonly used by multi-card holders, possibly like yourself. Many new cards come with an offer of a year free of APR. Transferring your balance from a card with a high APR percentage to your new card, allows you to pay off that balance within a year without paying any interest. There is one downfall with it, and that’s the one-time balance transfer fee that is usually a percentage of the balance being transferred.
Qualifying for an Unsecured Credit Card
Now that you understand what unsecured credit cards are, and have taken a look at key elements to the cards, let us give you a brief outline of how you go about qualifying for these unsecured credit cards.
Qualifying for an unsecured card can be quite difficult if you have limited credit, or bad credit history. When deciding who to give credit to, and how much credit they’re going to give, lenders take an in-depth look at your credit report. Debt to income ratio, payment history, collections, the amount of credit that you currently have, and delinquent accounts are considered when determining if you’re a high-risk borrower, or not.
Obtaining a free credit report from one of the three major credit bureau’s can help you to see where your credit stands. If your credit rating is currently poor, you can consider looking into a secured card to help boost your score into good standing. Once you’ve used your card responsibly for approximately a year or so, you can generally inquire about switching to unsecured credit cards with higher limits.
Your chances of being approved for unsecured credit cards are higher if your credit is already in good standing, you’ve been consistently paying off current debt, and bringing in enough money.
Now that we’ve been able to teach you the basics about unsecured credit cards, contact our customer support team so we can answer any other questions that you might have. We want to help you find the best possible card for your lending needs. The more education that we’re able to provide you with, the more secure you’re going to feel with your credit making decisions. We’re here for you, and all of your financial questions.
Unsecured credit cards are the most common type of credit cards. Besides the rewards programs and lack of collateral to pay, there are many advantages to having an unsecured credit card. The ability to have an unsecured credit card and pay it back diligently, makes you look like a reliable customer to many creditors.
This can help your credit score and allow you secure loans for your home, car, and other potential investments later on. Because the interest rates on credit cards are risk based, the better your credit score, the lower your APR is. Obtaining an unsecured credit card that you spend and pay regularly is the means by which you can access much more financing later on.
Let Us Help You Rebuild Your Credit
Getting approved for unsecured credit cards can take some time if you have bad credit, but it’s not impossible. There are steps you can take that can move you from an ineligible to sound candidate within a year to a year and a half.
Getting a secured credit card is a good first step; you have to make regular use of it in order to see its effect. If you are able to make small payments that you pay back regularly, over time your credit score will go up and your creditors will begin to have trust in your repayment abilities. This means you have many more opportunities to borrow money in the future. Because of the security deposit you pay upfront, you may be eligible for a much lower APR with a secured credit card than if you had requested an unsecured one and did not have a high enough credit score.
Furthermore, you may be able to get your initial security deposit back if you switch to an unsecured card later on. At Bonsai Finance, our customer support team can help you find the right place to request a card and get started on rebuilding your financial spending power.
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Credit Score Loan Size/Amount Loan Term APR Origination Fee All can apply $100 - $15,000 1 - 60 4.99% - 1.386% Varies by lenderCredit ScoreAll can applyLoan Size/Amount$100 - $15,000Loan Term1 - 60APR4.99% - 1.386%Origination FeeVaries by lender
Get a Co-Signer for Unsecured Credit Cards
Sometimes though, you do not have a year and a half to wait for a better credit limit. In this case, there are still options for you to get an unsecured card, even with bad credit. If you have someone who is willing to cosign for an unsecured card with you, there are lenders that may be willing to give you an unsecured card.
You can pay back your debts regularly on this cosigned card until you can prove that you are a reliable enough to do so individually. This gives you the flexibility to borrow more money and reorganize your financial obligations in a way that fits your current situation. Get in touch with our customer support team to find out the various options for getting a card, regardless of your credit score.