Credit cards for people with bad credit are currently in great demand due to the financial difficulties many people are facing today.
What are Credit cards for Bad Credit?
Bad credit credit cards are designed for people struggling with either a poor or limited credit rating. Whether they have this bad credit rating as a result of not paying bills or loan repayments on time, or from having a credit limit so high that loan or credit card payments could not be managed, the key fact is that it is now difficult for these people to gain credit. Also known as credit building credit cards, these cards are not only a means of helping those with a poor credit history to borrow money; they also exist to help borrowers rebuild their credit rating. By obtaining a bad credit credit card, a cardholder can start afresh to create a positive repayment history on their credit file, provided they keep on top of their monthly payments.
How to get a Credit Card with Bad Credit
Credit cards for bad credit history are relatively easy to get hold of, but applicants must first ensure they have a good idea of what they can and cannot afford to borrow.
Store cards for bad credit are one type of poor credit credit cards that are particularly easy to obtain. Though a store card for bad credit can only be used in certain shops or retail chains, it is still essentially a credit card that can build up masses of debt if left in the hands of someone that has difficulty managing their finances.
Applicants of bad credit history credit cards are assessed individually, with factors such as age, earnings and employment taken into account. There is usually no certainty that anyone will be eligible for certain credit cards for bad credit. Instant approval cards, however, are claimed by some lenders to exist, even if a person has a poor credit history.
The companies that do promote themselves as offering a guaranteed approval for credit cards with bad credit claim to give applicants an approval within minutes to help them on their way to rebuilding their credit rating.
Disadvantages of Bad Credit Credit Cards
The reason why lenders offer such guaranteed approval services is, however, the main drawback with credit cards for bad credit. A bad credit history credit card can carry very high interest rates as a way of compensating for the huge risk involved in allowing individuals with a poor financial history use a lender’s credit cards for bad credit rating. The minimum credit card for bad credit interest rate is likely to be 30% – much higher than what providers charge for standard credit cards. It could also be even higher than that.
Given this, it is essential that anyone taking on such a product takes every step possible to use this new line of credit responsibly. If they do so, it should be possible after some time to improve their credit rating to the stage where they may qualify for a card with much more competitive interest rates, and less stringent credit card charges. If they do not, however, the high interest rates and fees for these cards make it very easy to get into unmanageable debt, meaning they will end up worse off than when they took on the card.
Things to Watch for with Bad Credit Credit Cards
At a minimum, cardholders should regularly check their credit card statements to ensure their spending remains within acceptable levels. With most banks, building societies and other lenders now offering online access to accounts, this is easier than ever.
Aside from this, borrowers should be especially wary of any deals offering reduced interest rates for balance transfers, as these can run out quickly and leave the cardholder with a sizeable debt subject to a very high interest rate. In addition, it is strongly advised that bad credit credit cards cards are never used to obtain cash advances, as the interest rate will not only be high; it is likely to be charged straight away as cash advances usually do not qualify for an interest free period. This can mean debt rises even faster than the borrower has expected, even if they have been monitoring their spending.
Uses of Bad Credit Credit Cards
Nevertheless, a credit card for bad credit history may be the only option available to those who have a bad credit rating. If a person still wants to go ahead and apply for a credit card with bad credit, they should take a look on the market to find the best credit cards with bad credit most suited to them. As long as the card is used as a credit building credit card, a cardholder can begin to repair their bad credit history by making consistent monthly payments.