Having bad credit is a temporary state of being.
With good credit habits, in a few years you will be able to apply for good credit cards. Because of so many people having problem with bad credit, credit card companies saw the opportunity in providing a credit card for bad credit. Thus, credit card companies came up with sub prime credit cards. A sub prime credit card is one in which the required credit score is much lower than what most credit cards require for approval. As the name suggest, these credit cards are especially created to cater people with less than perfect credit history.
The Different Types Of Bad Credit Credit Cards
Bad credit credit cards come in a multitude of varieties. The most common being:
Meaning they don’t require a security deposit. Tend to have high fees that take up a lot of the unsecured credit limit they give you. Interest rate varies from card to card. Some are relatively low, while some quite high. Click here for a list of bad credit unsecured credit cards
Meaning they do require a security deposit for approval. These often have lower interest rates and fees. Credit limits are based on the amount you use as a security deposit. Some secured credit cards will allow you to put up to $5000 down. Click here for a list of secured credit cards
How To Choose The Right Card For You
Does it report to the credit bureaus? When choosing a card you want to make sure they report to at least 1 of the top 3 credit bureaus. There is no point in getting a credit card if it doesn’t report to at least 1 bureau.
What is the interest rate?
Understandably, not all credit cards for bad credit that are offered in the market are great and it is up to you to do your choosing carefully. Just because you don’t have great credit doesn’t mean you have to settle for unreasonably high rates. If you are interest rate sensitive you will find secured credit cards the best option for you.
What kind of activation fees does it have?
Most unsecured bad credit cards will have an activation and/ or annual fee. Heck even good credit cards have a annual fee. These fees will vary from card issuer to card issuer. Make sure you know exactly how much these are. There are some unsecured cards that will give you a credit limit of $300, but then instantly put all the fees on the card. So while you technically have a credit limit of $300, your available credit might only be $50 until you pay off the fees.
For that reason, most people opt to save that money up and just get a secured credit card. The annual fees are lower and usually after a year or two of good payments, the card becomes unsecured and your security deposit is returned to you.
Another reasons people choose to use secured credit cards is that the security deposit = your credit limit. A part of a loan approval process is looking at the clients comparable credit. We have had clients who have saved up $5,000 to put down on a secured credit card. Knowing that it will make it much easier to qualify for larger loans and credit limits in the future.
Be An Informed Consumer
Obtaining a bad credit credit card isn’t as hard as it used to be. There are a lot of options on the market. Its up to you to find the right card that suits your lifestyle and helps you improve your credit.
Read the fine print.
Make sure you have a clear understanding of the interest rate and fees associated with your card. Some cards are on a promotional rate, meaning it will only last for a short amount of time. Also, some of them send out their bills and only give you a 2 week grace period. You need to know that up front. We suggest that once you know when your payment is due, you set it up for automatic payment so that you are never late on a payment. Make sure you pay on time each month, AND the card you choose submits to the credit bureaus and you will see your credit score start to improve!
*Updated 7/6/2016 by L. Roberts