Which statement differentiates unsecured credit cards from secured loans?

Which statement differentiates unsecured credit cards from secured loans?

• A. Unsecured credit cards are not secured by collateral.
• B. They require collateral.
• C. They are guaranteed by the government.
• D. They earn no interest.

Answer: (A)

Collateral is the key difference here. A secured loan is backed by something valuable you pledge—the lender can take that asset if you don’t repay. An unsecured credit card, on the other hand, isn’t tied to any collateral; the lender relies on your credit history and promise to repay. That’s why the statement that distinguishes unsecured credit cards from secured loans is that they are not secured by collateral. The other ideas don’t fit because secured loans involve collateral, government guarantees aren’t the standard for these cards, and interest is typically charged on balances (though some cards offer temporary 0% periods).

Collateral is the key difference here. A secured loan is backed by something valuable you pledge—the lender can take that asset if you don’t repay. An unsecured credit card, on the other hand, isn’t tied to any collateral; the lender relies on your credit history and promise to repay. That’s why the statement that distinguishes unsecured credit cards from secured loans is that they are not secured by collateral. The other ideas don’t fit because secured loans involve collateral, government guarantees aren’t the standard for these cards, and interest is typically charged on balances (though some cards offer temporary 0% periods).