Credit Cards

Unsecured credit card

Credit cards can be split into two broad categories, secured and unsecured. A secured card is one that is usually backed by a savings account. Most types of credit cards are unsecured credit cards. There is no property to back up the amount you are borrowing. You can get an unsecured credit card from a bank or a credit card company.

An unsecured credit card means that you are borrowing money from the issuing company whenever you use the card. The money must be paid monthly. If you do not pay the full amount your balance will be carried over with an interest charge added on. Thus in time you can end up owing thousands of dollars to the credit card company. This can be contrasted with a prepaid credit card where all purchases you make on you card have already been paid for by you to the issuing company.

As most people use unsecured credit cards, there are a wide variety of them available. Many companies offer standard, gold and platinum unsecured credit card options. There are many things to consider when getting an unsecured credit card.

The APR on your unsecured credit card is the percentage that will be charged to your balance as interest. You can think of it as a bank loan where the amount of money you have outstanding has an interest charge levied on every month. Other aspects to consider when acquiring an unsecured card include a rewards program, quality of the issuing company and security features.

APR credit card

Since an unsecured credit card has no prepayment or collateral requirements, the approval process will depend on your credit standings. People with good to excellent credit ratings get the advertised low interest rates on their cards, while others will get higher interest cards.

With an unsecured credit card comes a great deal of responsibility. Many credit card companies entice people to spend on their cards with promises of 0% interest rates, delayed payments, etc. Also with students acquiring credit cards earlier and earlier, the average debt of a credit card holder is going up. It is important to educate yourself in credit matters and use a credit card only according to your budget and not think of it as one great loan source.