Bad Credit Cards 101 - What Types Of Bad Credit Charge Cards Should I Apply For?
Where do you go when you need a bad credit card? In today’s economy a credit card is a must. You can’t rent a car, book a flight or do a lot of things without at least one major credit card. Going to you’re local bank (even if you’ve got an account there) is usually not the answer. They will most likely turn you down. And so will a lot of credit card offers you see on the web today.
Most lenders have programs in place to help people with credit problems get back on track, but it’s important to apply for THESE cards so that you are assured of approval. This way you can begin rebuilding a good credit profile and get your score up where it needs to be!
There are several different types of bad credit cards available: prepaid, secured, and unsecured. It’s important to choose the right one for your financial situation because you don’t want a bunch of lenders pulling your credit just so they can turn you down. This will have a negative impact on your credit score (which is already in bad shape). So choose wisely and apply for the card or cards you are reasonably sure you will qualify for.
Unsecured Bad Credit Credit Card
Unsecured credit cards are what most people have. The bank extends you a credit limit at a fixed interest rate without you having to put any money in a holding account.
Bad credit charge cards are regular credit cards, except that the interest rates and fees may be a little higher. The initial credit limit is generally low, perhaps $250 to $300; it will increase periodically as long as the account is kept in good standing.
Advantages Of an Unsecured Bad Credit Card
Your payments and credit limit will be reported to the credit bureaus, which will help in rebuilding your credit.
You won’t have to give the lender any money in a holding account.
Disadvantages Of a Bad Credit Unsecured Bad Credit Card
Depending on your credit score the interest rates can be a little high. But the good news is if you make all your payments on time after about 6 payments you can probably call the credit card company and negotiate a smaller interest rate.
Choose wisely when comparing bad credit charge cards. Compare all of the terms and conditions closely. Some are much better than others. If used prudently (such as paying off charged balances monthly), they can be an excellent step in rebuilding damaged credit.
Secured bad credit credit cards are just that: they are secured by YOU with funds deposited in a savings account with the bank that issues the card. Secured bad credit cards are exactly the same as regular credit cards except for this feature.
The amount of money that you must deposit into the savings account varies with each program, but generally it determines your credit limit. If you deposit $300 into your collateral savings account, then your card has a $300 credit limit.
You may increase your credit limit by depositing more funds into the account.
Advantages Of a Secured Bad Credit Card
There are some secured cards that extend more in credit than they require you to deposit, possibly $100 more or one-and-one-half times the amount that is in savings. If you default on this card, the bank will take the money in the savings account to pay the balance.
It’s a good way for a young person to establish credit for themselves in a controlled environment (i.e. you won’t miss a payment or max out the card because you’ll have money in the holding account to pay if you get in a jam one month.
Disadvantages Of a Secured Bad Credit Card
The bank may or may not report to the credit bureaus on these cards, so check to make sure that they do.
Interest rates and fees will be higher than those of regular credit cards.
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