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Credit Cards for People with Bad Credit

Credit cards for people with bad credit – know you’re options

Making questionable credit decisions in the here and now don’t matter much, but they can cost you in the long run, in a big way! You could be written off with a bad credit score and getting loans will become a nightmare, you’d be denied credit cards or credit-based services and you’ll be stuck in financial turmoil. The worst part though, is the re-building and re-establishment of a good credit after that financial turmoil.

Luckily for you, all hope is not lost. Rather than hiring a company to ‘repair’ your credit score which is a hit and miss anyway, the best way to re-build good credit and raise credit scores is by working with and paying off the companies that you do owe.

One of the best ways to do that, thought ironic, is by getting a credit card. You must be wondering how that is possible, let us try to explain.

For people with bad credit, to quickly raise their score via credit card, there are two options:

  • Secured credit cards
  • Unsecured credit cards

Secured Credit Cards:

What really is a secured credit card? A secured credit card is slightly different from a regular credit card in a way that it requires you to make a deposit to acquire that credit card, holding money, as collateral or security for the purchases you make on that credit card to indicate that you will return and repay the loan. More often than not, this deposit is 50% or equivalent of the card’s limit. So if the limit of the card is say, $300, then the security could be $150 or even a full $300. If you fail and default on your payments, the credit card company keeps your deposit, but that’s not entirely bad. Unless you spend over your deposit, you won’t be able to send to the collectors or worry about them hounding you for missing payments. Moreover, a secured credit card reports your payments to a credit bureau to be included on your credit report. Timely payments help improve that credit score on your report.

Unsecured Credit Cards:

Traditional credit cards, which have no deposit liabilities, are called unsecured credit cards. Although these might be more difficult to procure than a secured credit card for someone who has a bad credit score and history some companies do make exceptions. While having an unsecured credit card seems like the quickest way to have access to a couple hundred, you are unlikely to end up with a lot of available credit. There is a fee attached to just opening an unsecured credit account, along with multiple others. There may be a setup fee, program fee, annual fee, monthly charges and a whole lot more. So basically you are spending so much more before you even use the card itself.

While having a secured credit card is not the perfect solution, because really, having to come up with the initial deposit when you are already having money trouble is difficult. Not only that there are higher interest rate charges with a secured credit card due to a bad credit and an automatic risk of default because of it. However, depending on your history, it can go a long way in helping you raise your credit scores and may be your best bet.

Think it through, weigh the pros and cons and then make a decision based on what is best suitable for your needs. Remember, bad credit doesn’t last forever!

Hope this post on credit cards for people with bad credit helped.