Why Unsecured Credit Cards For People With Bad Credit Are Available
If credit cards are the bane of the consumer, and failure to repay the
bane of credit card companies, why are unsecured credit cards for people
with bad credit available? Well, the fact is that falling into debt is
not the fault of the card company, and with a mature and cautious
approach towards spending,a credit card is still a wise investment.
Basically, there are advantages to issuing credit cards to bad credit
applicants, while getting credit card approval provides a chance for
cardholders to redeem their credit status.
Still, there are compromises to accept, including higher interest rates
and extra charges. These make unsecured credit cards more expensive, but
it also means that those with bad credit scores have an opportunity to
improve their financial futures.
Negatives to Consider
Unfortunately, there is a price to pay for not keeping finances in
order. When credit histories are not so good, lenders will almost always
charge higher rates of interest and set lower credit limits. So, when
it comes to providing unsecured credit cards for people with bad credit
there can be little surprise that card issuers will charge high rates.
Usually, there are also extra charges applied too, so the cost of
getting credit card approval when a credit score is very low can be
quite high. These charges can be manifest in the withdrawal of the 0%
APR introductory offer that is typically used to entice new cardholders
to use the card. Also an annual card fee will apply, which might
otherwise have been dropped, and some of the purchase benefits are also
taken away.
The interest rate charged can be as high as 20%, which is as much as 7%
higher than many typical card charges. What this means is that unsecured
credit cards can be extremely expensive - at least initially.
The Prepaid Option
There are ways around the problem of high interest. When seeking an
unsecured credit card for people with bad credit there are strict credit
limits available, sometimes as low as $1,000. This is just about enough
to pay a few bills every month, but on the bright side it means that
the costs are kept to a minimum.
One option is to choose prepaid credit cards, which are much easier to
get approval on. It is not strictly an unsecured card, since the limit
is only increased by the addition of a lump sum, thereby pre-paying the
cost in the first place. It is more like getting approval on a debit
card than getting credit card approval.
To get the green light on unsecured credit cards, it is necessary to
search far and wide on the Internet. This is where better terms can be
found, since the credit card industry is so competitive. And remember,
do not choose the first good deal that pops up - take time to compare.
Improving Terms
Still, high interest will have to be paid, and fees too. So, what good
do unsecured credit cards for people with bad credit actually have?
Well, it provides an opportunity to restore a strong credit status. If a
cautious attitude is applied, and the costs are not high. And if
payments are made on time, then late fees are avoided.
This effectively means that getting credit card approval can lead to
credit redemption. What is more, it increases the credit score, thus
making general loan applications more likely to be accepted, and with
better terms. In that respect, getting unsecured credit cards, even
those with low credit limits, and taking a disciplined approach to using
them, are worth the effort.
