Secured vs. Unsecured Credit Cards Explained

Most credit cards are unsecured, but secured credit cards - backed by a fixed deposit - serve a specific, useful purpose for certain applicants.

Unsecured credit cards

The standard type of credit card, where the issuer extends credit based on your income and creditworthiness alone, without any collateral - eligibility depends on the factors covered in our credit card eligibility guide.

Secured credit cards

A secured credit card requires you to place a fixed deposit with the issuing bank, and your credit limit is typically set as a percentage of that deposit amount. The deposit acts as collateral, reducing the issuer's risk, which is why secured cards are more accessible to applicants who might not qualify for an unsecured card.

Who secured cards are genuinely useful for

• First-time credit users with no credit history, who want to start building one.
• Applicants with a lower credit score who currently don't qualify for unsecured cards but want to demonstrate improved repayment behaviour over time.
• Students or others without independent, qualifying income, since the fixed deposit substitutes for income-based assessment in many cases.

How a secured card helps build credit

Using a secured card responsibly - making purchases and paying the bill in full and on time - is reported to credit bureaus just like an unsecured card, meaning it genuinely contributes to building a positive credit history over time, which can eventually support qualifying for unsecured cards or other credit products.

What happens to the fixed deposit

The fixed deposit generally continues earning its own interest (per standard FD terms) while backing the card, and is returned to you (net of any outstanding dues) if you close the card or convert to an unsecured card once your credit profile improves - the specific terms vary by issuer, so it's worth confirming before opening one.

A practical takeaway

A secured card isn't a lesser or inferior product - for the right situation, it's a genuinely practical, lower-risk way to start or rebuild a credit history, with a clear path toward better products once that history is established.