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Credit Card For People With Bad Credit.
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Credit Cards for People with Bad Credit: whats the catch
If you have a bad credit rating because of the past credit problems, then its quite likely that you would have received offers for credit cards which are especially meant for people with bad credit rating. While some of these credit-card offers may be very legitimate, most would seem questionable and even outright scams. If you want to find out how genuine is the offer, the smartest way is to take a deep look at the terms and conditions document. The facts are all hidden in the fine prints, and unless you thoroughly scan the documents you will never be able to trace out the catch. During the course of this article we will familiarize you with some of these fine prints, which differentiate between the good, the bad and the ugly.
Lets begin analyzing from the base level, which are the low-limit credit cards popularly known as starter cards. These cards look like any other credit card and will have the credit card companys logo such as Visa or MasterCard logo, and can be used just like a regular credit card for almost any thing such as booking a hotel room, paying for the dinner or shopping at the mall. When you begin looking at the terms and conditions document provided by the credit card issuer, you will find that the annual percentage rate is around the usual eighteen percent for shopping, and around 25 percent for cash advances. So far everything seems normal and is like any other regular credit card. Now when you take a closer look at the fees structure, you will slowly realize how expensive the deal is. Apart from the usual annual fees in the range of $100 to $150, you will find an additional account opening fees which is usually around $30. Going further, these cards also have something called the monthly maintenance fees, which is below $8 for a month. Taking a look at these figures, you will definitely get a shock because apart from the annual fees, none of these other fees are generally associated with the regular credit cards. And as you move down further you come across the section where we are available credit limit is mentioned. Normally the credit limit on these starter cards is around $300, which should surely leave you pleased. But dont get convinced so soon, rather concentrated on the math of it.
On the very first statement that you will receive, all the above mentioned fees that is annual fee of $150, account setup fee of $30 and a monthly maintenance fees of $8 will be all there along with your first purchase. So at the very onset you will have to pay $188 to get the credit card with a $300 worth of credit limit. To make it more interesting lets take the total monthly maintenance fee that you will be paying over a year into consideration, which will total to $96. So the total cost that you will have to incur for your $300 worth of credit limit will be $284. And surely with all these calculations the offer should not seem interesting anymore. This surely is a pretty expensive credit card, and has all the capability of ripping you off your hard earned money. With your bad credit rating already in place, you sure dont want to increase your debt burden for absolutely no reason. For a small credit limit like that, its a huge amount of money that you will have to pay. Thinking practically, a better alternative is to pay off some of your outstanding bills with this money and improve your debt situation.
However, of the three categories that we earlier pointed out, this credit card will fall in the questionable category, as we have much worse offers which we would like to put under the outright scams. There are some credit card offers for bad credit holders, on which the fees is so taut, that your starting balance will be much more than the credit limit. So when you receive the card you would already have gone over limit. Strangely, there are also some credit cards in the market which ask you to make a big upfront payment before you can receive the credit card, and in more cases than not the card never arrives. There is also a new category of credit cards for people with bad credit known as catalog cards, which are promoted as a credit card that may help you to build good credit. These credit cards are tied to some companies, and the card can be used only for the purchase of goods from their catalog. However, its all a big scam because when you take a look at the products in the catalog you will find that the catalog is full of nothing but grossly overpriced junk.
Advisably, a person with a bad credit history should always avoid credit card offers which come to him unsolicited. Rather carry out a careful research on your own to find out the most legitimate Credit card companies and make a lot of comparison amongst the different credit card offers before you finally apply for one. Dont base your judgment only on the APR, rather take into consideration the additional fees and charges along with the terms and conditions.
Factually speaking, if youre dreaming of getting a good unsecured credit card with a bad credit history, youre simply expecting too much. As we explained above, to get a dollar 300 credit limit you would be spending $284, thats the kind of offers you will receive for unsecured credit cards. But there is a way out, which it is to take a secured credit card from a reputed bank. To get a secured credit card you will have to deposit something like $250 with the card issuing bank, and you can enjoy much lower fees on your card. While the interest rates on these cards may also be similar to those questionable cards, the fee structure is definitely more pleasing. You would be charged an annual fee of not more than $30, and there is nothing like setup fees or monthly maintenance charge. That surely sounds much better and more economical. And if youre worried about the $250.00 deposit that you have to make, dont worry because it wont go anywhere and will be returned to you when you close your credit card account.
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