The volatile economy and cutthroat competition has made it a challenge to make money. Statistics show that the national debt continues to grow by the day. The main contributor of debt happens to be credit cards. As more people continue to use credit cards, they also find themselves in financial crisis. A person is therefore unable to meet the daily needs, may be declared insolvent, or worst still becomes ineligible to apply for credit cards. However, this is never the end of the road thanks to credit cards for bad credit. These are special class of credit cards targeted at people with poor credit.
Why People Go For This Type of Credit Card
This form of credit card has been around for quite some time. It is used by both individuals as well as businesses. There are several reasons that drive people to applying for this type of credit card. Although the motive may vary from one person to another, the following are the most common reasons:
- Inability to get an ordinary credit – A person, who is unable to get a credit card from a bank due to bad credit or other reason, may go for a secured credit card. It is much easier to get it considering a person may have to offer collateral.
- Way of building credit – A person trying to salvage his creditworthiness will use the credit card and ask the provider to notify the credit reference bureau of the positive changes. Overtime, a person is able to build the trust and solvency.
- Part of debt consolidation - A person facing insolvency issues may use the card as a way of consolidating all the debts. Banks or other financial institutions may takeover other debts and offer the affected person one credit card.
The type of card will vary with the situation. There are cards suited for a business; others are applicable for students who have large educational debt, while some cards are for individuals.
Types of Credit Cards for Poor Credit
Although all credit cards for bad credit serve the same purpose which is advance credit to people with bad credit, they will vary based on the security requirement, mode of payment, repayment duration, and other terms and conditions. The following are the main categorization of the credit cards:
- Secured Credit Cards – In order to qualify for this card, a person is required to make an initial deposit. This amount acts as security in case a person defaults in making payments. It is easily available even to people with very bad credit. The card may appear as a prepaid credit card considering that a person will usually be given a credit limit of between 50 and 100% of the amount deposited.
- Unsecured Credit Card – This is similar to the ordinary credit. However, the terms and conditions will be more stringent. For instance, a person will not be allowed to exceed the credit limit, the amount of credit is usually much lower, and the interest may also be much higher.
- High interest Credit Card -This type of card may either be secured or unsecured. It usually has high interest charges than a normal card. The interest acts as a cushion to the service provider for the risk taken in offering the card. Overtime, the high interest may be adjusted depending on how well the customer makes repayments.
- Low Balance Cards -There are also credit cards that come with a low balance. This limits the amount that can be spent by a customer. The provider will also not authorize a transaction that exceeds the credit limit. In due course, the limit may be increased if the customer makes timely repayments.
Although the credit cards for poor credit offer a person a second chance to salvage his credit worthiness, a person seeking the credit card needs to trend carefully. Lack of self discipline or proper information may make the person sink deeper into debt. The biggest risk also lies on the providers of the service. There are many unscrupulous firms that claim to offer the credit card only to end up charging a customer exorbitant fees as well as hidden charges. A person seeking credit cards for bad credit should always approach well established financial institutions. The institutions such as banks or credit unions will be able to come up with a package that will help the customer repair his credit in a convenient and safe manner.
Your Options For Getting Credit Card for Bad Credit
Getting credit card for bad credit has become a bit easier in recent years. There are now quite a number of companies that have introduced credit cards that focus primarily on approving those with a bad credit history. A credit score that is below 580 is considered to be bad credit. If your score is within this range and you want to be approved for a credit card, then you'll want to explore companies that specialize in issuing credit cards to those with poor credit.
Before you apply for a credit card you'll want to verify what your score is, as it will give you some insight on what type of card to apply for. In some cases your score maybe too low for an unsecured card. If that's the case, then you'll need to apply for a secured credit card to help rebuild your credit. As a general rule, anything below 500 will result in an immediate denial of credit unless the card is secured.
You'll find that most major banks such as Bank Of America, Chase, and Wells Fargo all issue secure credit cards for those with poor credit or no credit. This will give you the opportunity to build your credit while establishing your credit profile with these banking institutions. Once you've established several months of paying on time then you'll start to notice that your credit score will begin to increase. Continue to monitor your score on a monthly basis using a credit monitoring service. When your score has reached a range above 580, then you can apply for an unsecured credit card.
Once you've reached that stage, then you'll need to remember that anything below 660 is still considered fair to poor credit, so the credit card offers you'll receive will have a high interest rate. There are companies that specialize in these types of cards, such as Capital One Bank and Continental Finance. You'll want to apply for one of these cards, and ensure that you pay on time to further establish your credit.
After several months of also paying these cards on time, and ensuring that you do not go over the credit card limits, your score will increase. When your score has reached the range of 700 and above, you'll then be able to apply for cards with a better interest rate and also higher credit limits. By completing this process that was outlined you'll be able to enhance your credit profile and would have now established yourself as being credit worthy. This is simply the best process for getting credit card for bad credit that anyone can follow.