Are Credit Cards Secured Debt?

Credit cards are generally not secured debt. The majority of credit cards fall under the unsecured debt category which refers to debt that does not have any collateral or lien against an asset. The most common type of unsecured debt are credit cards, personal loans, lines of credit, payday loans and student loans. Although unsecured debt does not have physical collateral, the card issuers can hire debt collectors to confront you about your payment options if you miss payments to them. Because unsecured debt has the highest risk to the lender it will also bring the highest rate of interest in most cases.

Some banks and financial institutions may offer a Secured Credit Card. This is where a customer would give a one time up front cash deposit to the credit card company. The credit card company then holds the deposit and will issue the customer a credit card limit based on that security amount. They will hold this deposit for some time until the client builds a good standing relationship. This is common for people to obtain a Secured Credit Card when they have no credit at all or trying to build up their credit score if they have bad credit.

The most common form of secured debt includes options like mortgages and vehicle loans. Being able to finance large purchases with the collateral, means the creditor has the right to take the property to satisfy the debt in case of missed payments. In turn, this is a lower risk lend than unsecured debt options.

Unsecured Debt Examples:

  • Credit Cards *
  • Overdrafts
  • Lines of Credit *
  • Personal Loans *
  • Student Loans
  • Government Debt
  • Department Store Cards
  • Payday Loans

* can be secured, normally by their home, an investment, cash or other collateral such as a trailer, ATV or boat

Secured Debt Examples:

  • Mortgage
  • Vehicle Loans

Consumer Credit Counselling

If you are having trouble budgeting and have unsecured debt to repay, please contact us for a free consultation at 1-800-565-4595 or email and we can look at helping you with a Debt Management Plan or another consolidation option.