Secured vs Unsecured Credit Card: Key Differences

Updated on Friday, September 25th, 2026 | By IndusInd Bank

Summary

A secured credit card is issued against a fixed deposit, making it easier to obtain with little or no credit history. An unsecured card needs no deposit, but approval depends more heavily on income, employment and credit score. A secured card is useful for building credit; an unsecured card generally offers better rewards and higher limits.

Credit cards have become an essential financial tool for managing everyday expenses, building credit history, and accessing convenient payment options. However, when exploring credit card options, you may come across two main types: secured credit cards and unsecured credit cards. While both allow you to make purchases and repay the amount later, they differ in how they are issued and who they are best suited for.

Understanding the difference between secured and unsecured credit cards can help you choose the right option based on your financial profile and credit history. Many leading banks, including IndusInd Bank, offer a range of credit cards designed to meet different financial needs, whether you are building your credit profile or looking for premium lifestyle benefits.

In this article, we explore the key differences between secured and unsecured credit cards and help you determine which one may be suitable for you.

What Is a Secured Credit Card?

A secured credit card is a type of credit card that requires a security deposit or collateral to be issued. The deposit is usually placed in the form of a fixed deposit (FD) with the bank and acts as a guarantee for the credit card.

The credit limit of a secured credit card is typically linked to the value of the deposit. For example, if you open a fixed deposit of ₹50,000, the bank may offer a credit card with a similar or slightly lower credit limit.

Secured credit cards are commonly recommended for individuals who:

• Have little or no credit history
• Are new to credit cards
• Want to rebuild their credit score

Using a secured credit card responsibly by making timely payments and maintaining low balances can help establish or improve your credit profile over time.

What Is an Unsecured Credit Card?

An unsecured credit card is the most common type of credit card issued by banks. Unlike secured cards, these cards do not require any collateral or security deposit.

Banks approve unsecured credit cards based on the applicant’s financial profile, which typically includes factors such as income, employment stability, credit score, and repayment history.

Since there is no collateral backing the card, lenders rely heavily on creditworthiness when deciding whether to approve the application and determine the credit limit.

Unsecured credit cards are widely used because they often offer additional benefits such as reward points, cashback offers, travel privileges, and lifestyle perks. Many IndusInd Bank credit cards fall into this category and are designed to provide enhanced value through rewards, exclusive offers, and premium experiences.

Key Difference Between Secured and Unsecured Credit Card

Although both types of credit cards function similarly when it comes to spending and repayment, there are important differences between them. Understanding these distinctions can help you make an informed decision.

Security Deposit / Collateral

The most significant difference between the two lies in the requirement of collateral.

A secured credit card requires the cardholder to provide a security deposit, usually in the form of a fixed deposit. This deposit acts as protection for the bank in case the cardholder fails to repay the outstanding balance.

An unsecured credit card, on the other hand, does not require any deposit. Approval is based entirely on the applicant’s creditworthiness and financial profile.

Credit Building

Secured credit cards are often used as a credit-building tool. Individuals with limited credit history can use these cards to demonstrate responsible borrowing behaviour.

By making payments on time and maintaining a low credit utilisation ratio, cardholders can gradually improve their credit score.

Unsecured credit cards also contribute to credit building, but they are typically issued to individuals who already have a stable credit history.

Annual Fees and Interest Rate

Secured credit cards may have lower approval barriers but may sometimes include basic features compared to premium cards.

Unsecured credit cards can vary widely in terms of annual fees and interest rates depending on the card type. Premium cards may have higher annual fees but often provide additional benefits such as travel privileges, dining offers, and reward programmes.

Borrowers should always review the terms and conditions of any credit card before applying.

 Credit Limit

The credit limit on a secured credit card is generally linked to the value of the security deposit. This means the limit may be relatively modest, especially for first-time users.

In contrast, unsecured credit cards can offer higher credit limits, depending on the applicant’s income, credit score, and repayment capacity. As cardholders demonstrate responsible usage, banks may also increase their credit limit over time.

Also Read: What is the Maximum Credit Limit on a Credit Card?

Rewards and Benefits

Secured credit cards are usually designed for basic credit access and may offer limited rewards or lifestyle benefits.

Unsecured credit cards often provide a wider range of features such as:

• Reward points on purchases
• Cashback offers
• Airport lounge access
• Dining and entertainment discounts
• Travel benefits

Many IndusInd Bank credit cards offer these types of value-added benefits, making them attractive options for customers seeking both convenience and rewards.

Secured vs Unsecured Credit Card: Which One Should You Choose?

Choosing between a secured and unsecured credit card largely depends on your credit history and financial profile.

If you are new to credit or have a limited credit history, a secured credit card can be a good starting point. It allows you to build a credit track record while maintaining financial discipline. Over time, responsible usage may help you become eligible for unsecured credit cards.

On the other hand, if you already have a stable income and a healthy credit score, an unsecured credit card may be the better option. These cards often provide higher credit limits and access to a range of rewards and lifestyle benefits.

Ultimately, the right credit card should align with your financial goals, spending habits, and ability to repay dues on time. Exploring the range of credit cards offered by IndusInd Bank can help you find an option that fits your lifestyle while supporting responsible credit management.

Frequently Asked Questions

1. How can I choose the best secured credit card for my situation?

 Compare the minimum fixed deposit, credit limit offered against it, annual fee, interest rate, rewards and credit-bureau reporting. Also check what happens to the card if you close the deposit early.

2. How to apply for an unsecured credit card online in India?

 Apply through the issuer’s official website or app and complete the required KYC and income verification. Approval depends on the issuer’s eligibility and credit assessment.

3. Is it better to start credit building with a secured or unsecured credit card?

 A secured card is usually easier when you have no credit history or a weak score. Choose an unsecured card if you qualify without locking money in a deposit.

4. What are the eligibility criteria for secured credit cards?

 You generally need an eligible fixed deposit, valid KYC documents and compliance with the issuer’s age and residency rules. Income and credit-score requirements are often less strict than for unsecured cards.