Is a Revolving Credit Plan Unsecured or Secured?

A revolving credit plan is a credit card or line of credit on which an individual can make purchases up to a pre-set spending limit. When individuals who get such a plan pay off the purchases, they can again charge an amount equal to the spending limit on the account.

Facts

Many varieties of revolving credit plans exist for consumers to choose from. Revolving credit may be either secured or unsecured depending on the consumer's eligibility and personal preference.

Types

Unsecured credit is extended borrowers on their word that the debt will be repaid. Secured credit plans, however, require the borrower to provide collateral that the creditor may seize in the event that the borrower ceases to pay as agreed.

Considerations

Unsecured credit plans are only extended to borrowers who have high enough credit scores to qualify. Borrowers with bad credit are a higher risk to creditors and are often only eligible for secured credit.

Features

Revolving credit plans that are unsecured typically offer consumers a higher spending limit than secured plans. In addition, secured plans often charge higher fees and interest rates than unsecured plans.

Warning

Revolving credit can be used to boost your credit score if you make all of your payments on time. Some secured accounts may not report to the credit bureaus. If an account is not being reported on your credit report, your score will not benefit by your timely payments.