If You Have a Poor Credit
The importance of owning or having access to a credit card has never been as obvious as it is in today’s modern world. Whether it be for the convenience of not having to carry cash, the massive increase in electronic payments and online shopping or simply the ability to buy something now and pay for it later; credit cards have a vital role to play in our lives. Unfortunately, credit cards can also leave a nasty taste in your mouth. Managing credit cards payments and debt in general is not something that comes naturally to most people. More often than not it is only after a bad experience that the majority of young people learn the practicalities and importance of correct and proper money management. While this is something that people do eventually learn, it can often be too late to prevent a negative effect on your credit score. As everyone knows, the cost and availability of personal credit, including credit cards, is directly linked to individual credit scores. Those with bad credit scores can easily find themselves in a position where they cannot get approved for a regular credit card. Even worse, people with average or fair credit scores can find themselves punished with prohibitive interest rates. Fortunately, there are options open to these people. They can apply for a credit card that is specially targeted for people with bad credit.
What are Credit Cards for Poor Credit?
Credit cards for poor credit are exactly what they sound like; a credit card facility that is intended for use by those with fair or poor credit scores that are unable to get approved for a regular credit card. While this might be someone who has had serious problems with debt in the past, it is just as likely to be your average middle class citizen who has one or two marks on their credit history. These people usually can choose between two different options – secured cards and unsecured cards. There are benefits and drawbacks to both, and understanding these differences will allow you to find the best card for you.
Secured credit cards allow users to place a deposit with the card provider that acts as a form of security against the credit. You might have heard of pre-paid credit cards – a secured credit card is very similar in operation. Like a pre-paid card, your deposit determines the card limit. What is different for those with poor credit is that secured credit cards report to the three major credit reporting agencies. This has the added bonus of positively contributing towards your credit score so that you might be able to get approval for a standard card in the near future.
Unsecured credit cards are another option, but while these can be tempting for those not looking to place a security deposit, they can often end up quite a bit more expensive. Secured credit cards are reasonably inexpensive as the financial institution is taking on very little risk. With unsecured credit cards for poor credit, the financial institution is offering the equivalent of a regular credit card. The risk to the bank is far bigger, and as such the interest rates are generally higher and the initial cost and additional charges are much more expensive.
What are the Best Credit Cards for My Credit?
The Capital One Secured Mastercard is an extremely popular option for those with poor or fair credit. While the APR is slightly expensive, it is not prohibitively so. At 22.9%, it is a rate you might see with many normal credit cards for those with good credit. The Capital One Secured Mastercard has an annual fee of $29, which is very competitive for this type of card. Importantly, users of this card benefit from their usage being reported to the three main credit reporting agencies. This is extremely helpful for users, as it allows them to build up a positive credit score and ultimately apply for an unsecured card. The Capital One Secured Card even offers the opportunity to increase your credit limit beyond the security deposit, provided the use of the card is satisfactory. With a grace period of 25 days on purchases, users can also avoid paying any interest on the card.
The Platinum Zero Secured Visa Credit Card is a different kind of targeted credit card for poor credit. Unlike the Capital One Secured Mastercard, the Platinum Zero has an APR of 0% on purchases. You read that right – the APR is 0% on purchases, and 9.99% on cash advances. Like the Capital One card, the Platinum Zero card reports to the three main credit reporting agencies, so users can build their credit score. It is worth noting that those looking to gradually build their credit would be better matched with the Capital One card, as the Platinum Zero card has a monthly fee of $9.95, and this can often offset the benefit of the 0% APR.
Why Should I Get That Type of a Credit Card?
It is important that people with poor or fair credit don’t see credit cards as a method of accessing further credit. Credit cards for poor credit can be fantastic when used correctly, but users should not lose sight of their intentions. These cards can, and should, be used to rebuild damaged or poor credit so that they might avail of cheaper and more structured lending in the future. Secured card is far from ideal in the long run but can help to solve important issues currently. Using these cards to repair and build positive credit scores help users become more financially independent, and allow them to get used to budgeting and managing funds responsibly.
It is worth noting that using a credit card can often result in an individual’s credit score improving to the point that they start receiving offers for pre-approved credit cards. While this may be tempting, it is important to remember the reasons that a secured credit card was needed in the first place. When you do get to the stage that you qualify for an unsecured card, you should always shop around and make sure that you apply for the most suitable card. Otherwise, you could find yourself in an inescapable cycle of poor/fair credit scores. Save money; shop smart.
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