Bad Credit Cards
With the recent economic slowdown in US market, the people with bad credit history has increased. Having bad credit history; however, does not deprive one of applying to and having a credit card but qualifying for a traditional credit card might be a difficult task. Bad credit credit cards are launched by banks and financial institutes to cater to people who have a bad credit history and low credit score and thus do not qualify for traditional credit cards. A bad Credit credit card often comes with high interest rates and high processing fee or annual charges and strict rules and regulations.
There are three kinds of bad credit credit cards as detailed below:
- Secured Credit Cards: Secured credit cards, as the name signifies, are issued against collateral and hence are secured credit to the issuer. The collateral can be a fixed deposit or a savings account. The limit of the credit is governed by the amount of fixed deposit or balance in the savings accounts as the case may be. When issuing the card the account linked is reported to the credit bureau. The interest rate and charges are similar to any other traditional credit card.
- Prepaid Credit Cards: Prepaid Credit cards are issued against a pre deposit of money. The card limit is same as the deposit amount and the card holder can use the card for purchases up to the deposit amount. Once the card runs out of money, the card holder can reload the card with fresh deposit. This type of cards are again easy to get and also helps the card holder with low credit score keep a check on his spending.
- Unsecured Credit Card: Unsecured credit cards are traditional credit cards which are issued after checking the credit history, credit score, employment record, income sources and other checks as done for normal credit card approval. However, the card will come with high interest and high maintenance charge since you have bad credit history. With bad credit record it is difficult get this kind of card approved as compared to the above two types of cards.
Nowadays, almost all the banks issue these kinds of cards and it also helps the card holder in restoring the credit score once he starts making regular payments. Bad Credit Credit card can be applied to the bank where you maintain a savings accounts or fixed deposit account. You have to provide your income data and financial stability proof to satisfy the bank on repayment terms. The processing for first two kinds, as mentioned above, are easy and faster as compared to the third type of unsecured credit card. Normally bank prefers their existing customers over new customers while issuing credit cards to applicants with bad credit history. However, before applying, make sure that your card is reported to the credit bureau since one important purpose behind this card is to improve your credit score. Once approved, make sure that you do not indulge in big purchases and use the card for smaller purchases only. Also make sure that you make payment on time.
