Credit Cards For Bad Credit

Having ruined credit can be devastating. It is difficult to rent a car, make hotel reservations or shop online. If you could find credit cards for bad credit then it wouldn’t be so bad.

These have always been difficult to find. In a tough economy they are even more rare. If you’ve had financial problems that have left you with negative items in your credit record, then you know how challenging it is to live a normal lifestyle.

Most employers pull a credit report as you move through the hiring process. And finding a landlord to rent to you when your credit report is riddled with late payments and collection accounts is difficult. In the past, a bad credit history made it difficult if not impossible to gain approval for a credit card.

Financial markets have evolved to accommodate a wider customer base that includes consumers who have a poor credit profile. There are cards available now for borrowers who cannot obtain credit elsewhere.

There even prepaid credit cards that report your consumer behavior to an alternative reporting agency. These aren’t really credit cards but they can help build alternative credit history if someone is willing to put in the effort. This can help you work towards obtaining new credit accounts.

There are also unsecured cards marketed to people with “fair” credit that has some blemishes but not poor enough to be placed in the truly “bad borrower” category.

If you have had negative credit reporting, cards for bad credit borrowers provide you with an opportunity to quickly improve your profile. By paying on time each month, these cards demonstrate your good payment habits. This leads to a better credit rating and offers for credit cards with low interest rates and rewards.

What Are Bad Credit Credit Cards?

Credit cards offered to borrowers with poor credit have risk for the creditor. To offset this risk, banks may require a deposit as with secured credit cards. They may also charge fees and higher interest rates for the account.

Secured accounts require a cash deposit to be held by the financial institution providing the card. The amount required to open the account may be as little as $40-50 or it can be several hundred dollars.

Banks hold this money in a savings deposit that collateralizes the card. It protects the bank from losing money due to missed payments or default.

For example, if you have a card like this with a credit limit of $500 it may require $500 deposited to an account that will pay off the card if you default. This way, the bank issuing the card takes little to no risk that the balance will remain unpaid. This is why it’s called a secured credit card.

This is generally no more restrictive than having a savings account with a bank, since many banks offering cards for borrowers with bad credit pay interest on the deposit in your account. In this way, it is much like having a savings account with a credit card attached to it.

The greatest benefit of having such a card is that most banks report your payment history to the credit bureaus. After several months of on-time payments, the bank may return your deposit and convert your secured card into a regular low interest rate credit card. It is a great way to rapidly rebuild your credit with a solid recent payment history.

What to Look For In Cards For People With Bad Credit

If your bad credit is keeping you from being able to get low fee credit cards, then it is worthwhile to shop around for these types of cards. There are as many different vendors offering cards for borrowers with bad credit as there are in the regular credit card markets. Some have no or low annual fees, while others charge large amounts each year for the privilege of having the card account.

Expect to be charged higher interest rates than you would be charged if you were offered a card marketed to someone with decent credit. This especially true for unsecured credit cards marketed to borrowers with poor credit. There are a few other things you can look for when comparing offers for these kinds of cards:

• The minimum deposit required to maintain the account
• The maximum credit limit you will be offered
• All fees charged to keep the account open
• Conversion to an unsecured credit card after your bad credit improves

There are also unsecured cards marketed to people with “fair” credit that has some blemishes but not poor enough to be placed in the truly “bad borrower” category.

Credit cards for consumers who have bad credit are great when they are included in your plan for fixing your credit record and improving your credit scores. The cost is justifiable when you consider how quickly they can boost your scores and get you on the fast track to good credit.