Bad Credit Credit Cards People Poor Credit Scores

Sometimes life lands you in a situation that causes your credit to suffer. A job loss or illness can send your credit rating south leaving you with nothing to do about it. Some creditors may let you slide a month or two, but your records will still show a delinquency. A stolen identity can also leave you feeling violated and unable to resume a normal life with credit. It is during these times you may have to search a little harder to find companies that wan to deal with people who have bad credit. There are a handful of lenders who will help you re-establish your creditworthiness by using one of their credit cards. Searching the Internet will give you a good idea of what types of unsecured credit card companies will deal with bad credit.

Companies like Capital One, Orchard Bank, Providian Financial, Bank of America, Wells Fargo and even Citibank have plans to help you get back on your feet again. But at what price will you have to pay? The price is interest. Interest rates from these companies can be up to 25-30% annually. So it is important to manage your money and credit more wisely. One of the many benefits of using one of these preferred lenders is that they report positively to the major credit scoring repositories. That means if you make timely payment it will be in your favor and will help boost your credit rating back up. The interest you pay is a small price to pay to get back on your credit worthy feet.

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The secured credit card route. Most of the major banks and lending institutions may seek a deposit matching mechanism called a secured credit deposit before backing a credit card for you. This card is used the same way that a normal credit card is, however the cardholder must fund it before using. If the cardholder deposits $100 into the interest bearing account their credit card is funded at 100% of their deposit. Some credit cards can at their disposal issue double or triple matches to boost the amount the creditor can spend.


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The deposit of $100 can return $300 in credit terms. Secured credit cards also report positively to the credit agencies and will eventually become normal revolving accounts and the balances held for deposit are credited back to the cardholder’s account. A very positive way for people with bad credit to obtain the financial vehicles they need.

if you've had credit problems, then you've probably received offers for credit cards aimed at people with bad credit. These offers range from legitimate, to questionable, to outright scams. How can you tell the difference? The answer is to read the fine print, usually to be found in a document called "Terms and Conditions." To show you the difference between "the good, the bad, and the ugly" in the low-end credit card market, let's take a look at the fine print associated with such offers.

We'll start with one of the more popular low-limit "starter" cards available today. These are actual terms published by a major company at the time this article was written. The card comes with a Visa logo on it and looks like a regular credit card, so you can use it as an extra piece of identification when you're booking a hotel room, renting a car, and so on. In the "Terms and Conditions" document, the first thing we see is the annual percentage rate (APR), listed as 19.5%.

That's not a particularly attractive rate, but it's not as high as a lot of other cards. A little farther down, we see that the APR for cash advances is higher, 25.5%, which is normal since there is greater risk involved to the company. Where it really gets interesting is the section that lists the fees associated with the card. In this example, there is an annual fee of $150! There is also a $29 fee to open the account, as well as a monthly "maintenance" fee of $6.50. Whew! That's a lot of fees. But wait! It gets better.

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Toward the bottom of the document, buried in the fine print, we see something called "Available Credit Limitations." In 8-point typeface (very tough to read on a computer screen or printed page), you are informed that your generous initial credit limit will be a whopping $300. On your very first statement, you will be billed for the $150 annual fee, plus the $29 setup fee. The $6.50 monthly fees will start appearing after you make your first purchase on the card.

Let's take a closer look at the math here. It will cost you $179 up front, plus $78 per year, to obtain $300 worth of credit. Your total cost for the first year is $257, assuming you pay off the balance each month and don't incur any regular interest charges. Sound like a good deal? Does it make any sense at all to pay $257 to obtain $300 worth of credit? That's 85.6% in effective interest! If you keep a running balance of $300 on the card, and just make the minimum payments every month, your effective interest rate will be 105.2% for the first year, and 95.5 % for subsequent years. That's some pretty expensive credit! This credit card offer, while legal, still counts as a total rip-off.

Unsecured Credit Cards For People With Bad Credit Scores. As bad as the above sounds, it still only qualifies as "questionable" rather than being a full-on scam. There are much worse offers floating around out there. I've even seen some "deals" where the fees are so stiff you start out above the credit limit before receiving the card in the mail! In the bogus category I'd also include cards where you are forced to pay an advance fee prior to receiving the "guaranteed" credit card, which of course never arrives.

There are also "catalog cards," where you supposedly build credit by purchasing items through a card tied to one particular company and their catalog of goods. The problem is that the catalogs usually consist of grossly overpriced junk. So what constitutes a good unsecured credit card offer for someone who's experienced serious credit problems and wants to take action toward rebuilding his or her credit? At the risk of annoying the big credit card marketing companies who target the "sub- prime" market (consumers with bad credit histories), my advice is to completely avoid any offer that comes to you unsolicited. Instead, do the research on your own.

Check out www.bankrate.com for current offers by legitimate credit card companies. Shop and compare before you apply. Remember, the APR is only one aspect of your decision, and not necessarily the most important. What you want to look at very carefully are the annual fees, setup fees, and monthly fees.

It's important to realize that you may not be able to obtain an unsecured credit card when you're just starting to rebuild your credit. Instead of paying $257 to obtain $300 in credit, you'd be far better off placing $250 as a deposit toward a good SECURED credit card from a reputable major bank. In this real-world example, the annual fee is only $29, the APR is 19.99%, and there are no setup fees or monthly maintenance charges.
Your $250 deposit will net you $250 worth of credit (less the $29 annual fee), and you'll build positive credit history just as quickly as with the ridiculously expensive offer discussed above. Plus that original $250 deposit is still YOUR money. After you've been granted unsecured credit again, and you've paid off any outstanding balance on the secured card, you can get your deposit back. One final tip. If you have the opportunity to join a credit union, you should consider checking out their offers for low-limit unsecured and secured credit cards. Credit unions frequently offer much better terms than regular commercial banks. Through credit unions, you can often find credit cards with no annual fees, lower interest rates, and more flexibility.
Be sure, however, to confirm that the credit union reports account activity to the credit bureaus. Otherwise, your positive payment history on the new credit card won't lift your credit score. And remember, no matter what card offer you're considering, be sure to read that fine print!