Unsecured Student Credit Cards

Unsecured student credit cards versus secured... which is best for you? With the popularity of credit cards being used for almost all kinds of consumer transactions, it would be not surprising to know that there are currently a number of credit card products and types out in the market.

There are more people now who are treating credit cards like necessities. For these people, credit cards are must-haves in their pockets and wallets.

Why is this so? Because credit cards are offering cash-free transactions and more. Aside from the usual advantage of not having to carry cash, there are freebies and rebates that are offered to reward credit card users for using their cards on transactions.

Another use of credit cards nowadays is the establishment of credit history. Yes, in modern financial world, people who do not own credit cards are technically not existent. Lack of credit history is due to non-ownership of any credit card.

Unsecured student credit cards are the type where there is no deposit required. The line of credit is simply based upon your ability to repay (job and income) and your past credit history. This type is the most popular. It does not tie up your savings as a deposit.

Secured credit cards are one type of credit cards that are characterized by the need to open a savings account that would serve as a back up or security for the credit card account. Thus, if the credit card holder fails to pay his credit card bills, the amount collectible will be automatically deducted to the fund within the bank savings account.

The credit card issuer will first secure an authorization that would allow the company to get hold of the credit card owner's bank savings account if problems regarding payments of dues arise.

In that sense, the term 'secured' is used because security of payment is ensured when the credit card account is backed by a savings account in a lender.

Both unsecured student credit cards and secured are offered by major, and even some minor, banks. It is because these institutions have the authority and capacity to enable customers to open banking savings accounts simultaneously with the credit card account.

Unsecured student credit card applications are more difficult to get approval for, because the risk to the lender. If someone has difficulty getting this typical kind of card, they can then try for a secured card as an alternative.

In ordinary terms, the secured credit card holder is required to deposit 100% to 200% of the overall amount of the desired credit limit for the credit card account.

For example, if a credit card holder wants a $500 credit limit, then he must make sure the deposit amount on his existing bank savings account would be equivalent to $500 or in some cases $1,000. This can be a burden on a "starving student" with little funds to work with.

However, on some cases, credit card issuers are giving more flexible terms that would raise credit card limits even without raising the required savings account total deposit.

Payments: Although the secured credit card accounts are secured with bank savings account deposits, the cardholders are still expected to make payments on time and in required amounts, just the same as with unsecured student credit cards.

The credit card account will run as a normal credit card. The issuer would only be required to get hold of the savings deposit, if the customer intentionally does not pay his dues within about three to six months.

If that happens, the credit card account will be frozen and the amount dues will be deducted from the savings account. Similarly, with unsecured student credit cards, if payments are not made regularly the account will be closed also.

Furnishing the credit history

Unsecured student credit cards are great for people with good credit history and a steady income. Secured credit cards may be the best strategy for people with bad credit, and it can also help to improve their credit records.

The person with bad credit will only have to pay his bills on time and in good amounts so he will be considered a responsible payer by the secured credit card issuer.

After a few months, if the person's records remain clean, the credit history will eventually be refurbished and that person will be able to open regular unsecured student credit card accounts with more reliable and major credit card issuers.

Secured student credit cards can be truly helpful. However good it can be, the card holder should still make sure to be as responsible as he can be when using the credit card for different transactions.

Whether using unsecured student credit cards or secured, the important thing is keeping the debt low and making the payments on time.