The first thing that you need to know is that in the eyes of the credit card companies, there is no such thing as bad people. They don’t run background checks or check to see if you have ever been arrested, all they do is look at your credit report.
Now, if you are talking about people who are simply a high risk when it comes to credit card debt (although credit card companies really don’t refer to them as bad people), then you will find that there are credit cards for people in those situations. Bad credit credit cards are designed specifically to help you rebuild your credit.
What kind of bad credit credit cards are there?
There are two kinds of bad credit credit cards. There are secured credit cards and unsecured credit cards.
A secured credit card is secured debt. According to the Legal Information Institute, this means that a bank (lender) can take your property if or when you default on your debt. In the case of a secured credit card, this means your cash!
In order to get a secured credit card, you have to deposit cash into an account. While you have your secured credit card, you do not have access to that cash. It does not earn interest, in most cases, and you don’t get a debit card associated with the account.
When you use your secured card, you are using credit; you aren’t depleting the cash that is in your account. All that cash is there for is to secure the credit you are being offered. Your credit line will be the amount that is in that secured account and, in most cases; you can increase that amount if you want.
If you default on your payments, then the creditor has two options, they can take the payment from your account and reduce your credit limit or they can close your account completely and cancel your card.
An unsecured credit card is the same as a regular credit card. However, you will typically have a much smaller credit limit and a much higher interest rate. Some credit card companies will increase your limit every six months that you make regular on time payments.
Why bother with a secured credit card, can’t I just use a debit card?
Many people confuse a secured credit card with a preloaded credit card, but they just aren’t the same. A secured credit card is an actual credit card and the credit card company will report your good or bad standing with the credit reporting agencies.
While it may seem as though a secured credit card is not better than a debit card, a debit card cannot help you improve your credit. Debit cards ensure that you only spend money that you have, which is a good thing, they simply do not provide you with the ability to improve your credit score.
As time goes on and you build good credit, many credit card companies will transition you into a regular credit card. At that time, you can close your cash deposit and get that money back.
Don’t secured cards have many fees?
Whether a secured credit card has many fees depends on where you get your secured card. Some credit card companies charge monthly maintenance fees, start up fees and even annual fees for a secured account. Others, however, charge nothing more than what they do for any credit card that they offer.
In addition, you will find that there is a wide range of interest levels as well for secured credit cards. Some credit card companies charge the type of interest rates they would for anyone with bad credit, which can be very high. Other creditors, especially credit unions, offer incredibly low interest rates because cash backs your credit card already.
It is for this reason that it is very important to compare credit cards, whether you are going for a secured credit card or a classic credit card, to help you improve your credit. You will find that as with any credit card, bad credit credit cards come with a wide variety of interest rates and terms that you need to consider.
Of course, they will all comply with the Federal Reserve laws for credit cards, so you don’t have to worry about any shady behavior in that department. You will also want to consider getting a secured card from a name that you know rather than an unknown creditor, this simply offers you better protection.
Use the free credit card chaser tool to compare secured credit card http://www.creditcardchaser.com/secured-credit-cards/ terms today!
- What is a prepaid debit card?
- Are there such a thing as debit credit cards?
- Where can I get a list of secured credit card companies?
- Langley Federal Credit Union Share-Secured Credit Card
- New Millennium Bank The Pampered Chef Consultant Visa Credit Card
- Public Savings Bank Secured Card
- Are there any credit cards for people with no credit history?