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Unsecured credit cards with bad credit

Updated on August 19, 2014

Individuals with bad credit have the least number of options with regards to credit cards. This is mainly because not many credit card companies want to take the risk of issuing a credit card that may not be repaid. The level of difficulty in getting a credit card increases with a decrease in the credit score. The situation is however not fully hopeless. Although it is difficult, unsecured credit cards for people with bad credit is a possibility.

Credit cards for people with bad credit

The first thing that people with bad credit need to do before applying for a credit card is check their credit scores. You can check trusted websites for availing a free check of your credit score, or you may contact any of the credit bureaus.

There may not be many, but some credits cards are designed to specifically cater to individuals with bad credit. People with even a low credit score of 580 may avail of unsecured credit cards which come with an annual fee and a high regular APR. It is also possible to ask for a waiver of the annual fee.

Some banks may check the credit score before issuing credit cards for people with bad credit. This only helps them decide whether to offer such people a secured or an unsecured credit card. Such a check of the credit score is only a soft pull and generally does not adversely affect the credit score. These banks often give an unsecured credit card to people with credit scores that are as low as 560. These cards may however come with a variable upfront processing fee, an annual charge, and regular APR that is moderate to high.

Retail stores are also known for approving unsecured credit cards for people with bad credit. There is a better chance of getting approval for limited-use credit cards which can only be used at the store as opposed to getting a credit card backed by MasterCard or Visa.It is however important to note that unsecured credit cards issued by retail stores come with high rates of interest and low credit limits. The best manner to manage such cards is by charging small amounts to it and repaying the full balance every month.

Avoid wasting time on credit cards meant for good or excellent credit

Do not apply for credit cards that cater to people with excellent credit scores, just to verify if you get approved. You may not only face rejection, but the extra applications can further dent your credit score.

It is possible to identify the niche credit cards via the kind of benefits provided by it. Credit cards with low APRs, fantastic rewards, and promotional interest rates are mostly for people with high credit scores. People with poor credit are generally not approved.

Consider paying a deposit

A lot borrowers do not go for secured credit cards as they can only be availed with a security deposit given against the card’s credit limit. It may however be noted that a secured credit card that gives reports to all the main bureaus is better than no credit cards. Also, several secured credit cards can be turned into unsecured ones after on-time payments for a year.

If the security deposit is preventing you from going for a secured credit card, then you may start saving 50 to 100 dollars in a savings account every month. Thus in no time, you can have the required $300 ready for a secured credit card. You may use a part of it as application fee and the rest can be for the credit card balance. The credit limit may be low, but so is also the case with unsecured credit cards for people with bad credit.

This minor sacrifice will not only help you get a credit card but will also be a positive step towards bettering your credit score. The deposit gets returned to you as long as you make timely payments and do not default on them.

Other factors to look into

Subprime credit cards or fee harvesters who provide unsecured credit cards for people with bad credit should be avoided. They come with a very high upfront application fees that consume most of the credit limit. Federal law restricts the fees charged to 25 percent of the credit limit. But these credit cards work their way around the law and charge high fees before even issuing the card.

Prepaid cards may be promoted as a viable option for individuals with bad credit. However, unlike credit cards, prepaid cards are not credit products and thus do not contribute towards improving your credit score. Also, customers need to make deposits into the prepaid card. All purchases get deducted from the balance on the prepaid card. This is not the case with credit cards.

It is important to remember that bad credit does not last forever. All you need to do is make regular payments for your unsecured credit card with low benefits and high interest rates, improve your credit, and then go for better credit cards.


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