Which Type Of Credit Card Carries The Most Risk?

Here’s a question for you with the answer among the options labeled A to D. Which type of credit card carries the most risk?

A. Secured credit card with a variable rate of interest.

B. Secured credit card and a fixed rate of interest.

C. Unsecured credit card with a variable rate of interest.

D. Unsecured credit card and a fixed rate of interest.

Which Type Of Credit Card Carries The Most Risk? – The Answer Explained

From the answer options labeled A to D for the question – Which type of credit card carries the most risk? the answer is: “C”. An “Unsecured credit card with a variable rate of interest” is the credit card with the most risk. The simple explanation to this is that with an uncollateralized credit card with a variable rate of interest there is a lot of uncertainty. The truth is, you really don’t know how high the interest rates may get over time as they may be tied to different economic indices like market trends, inflation and so on. With a varying rate of interest on your debt, you may find it difficult to make regularly scheduled debt payments.

Which Type Of Credit Card Carries The Most Risk? – Why Options A, B & D Have Less Risk 

With options “A” and “B”, the bank has already secured collateralized cash deposits from the customer and so are exposed to very little risks. The customer is also not exposed to too much risk as the credit card is collateralized. What this means is that if a debt on the card can’t be paid, the bank simply falls back on the cash deposit made by the customer to secure the credit card. For option “D”, the rate of interest is fixed. So even though the credit card is unsecured, the customer has a clear idea of what interests need to be paid and when.

In Closing

So now you know which type of credit card carries the most risk? You should always endeavor to get unsecured credit cards with a fixed rate of interest. This is because this type of credit card carries less risk from a customer’s viewpoint.