Bad Credit Credit Card Options
If you have bad credit, all hope is not gone. There are still options available if you are looking for a credit card. While many major banks and credit card companies definitely prefer dealing with those who have good credit, many do offer credit alternatives for those of us with less than perfect credit or those without much of a credit history.The first thing to do is to figure out what card is right for you. Decide how you plan to use the credit card and then start looking at the product options. The variety of options goes from standard unsecured credit cards with relatively low interest rates to those with higher risk variable rates. Then there are secured credit cards and finally prepaid debit cards.
If you need to use the card for short-term borrowing, then a standard credit card would be best for meeting your needs, but if your credit isn’t very good you may end up paying a high interest rate for that type of card. Make certain that the cost of borrowing the funds by using a credit card is worth the expense. Keep in mind that if you carry a balance for very long while only making minimum payments, the purchases you make on the card will end up being much more expensive than the purchase price. Unless you are going to use the card to “borrow” money for an item that you really need, such as a new hot water heater, you should probably choose to forego the purchase or find another way to finance it.
Many banks will charge an annual fee even if they don’t normally for higher risk accounts along with the higher interest rate. However, if you don’t plan to carry a balance and will pay it off in full each month, avoiding the high finance charges, then a standard credit card may still be a good choice if you can find one with rewards that will make up for the annual fee. Many banks offer incentives on credit cards, such as points towards rewards, cash back or even airline miles for using their credit cards.
Another option is a secured credit card. This can be a good option for you if you want a credit card and are able to make an initial deposit as collateral. The bank will hold this deposit as an assurance against your assigned credit line. Once you have established a good payment history, which will also be helping to improve your credit, the credit card issuer may begin to extend credit beyond your collateral, turning this into a true credit line. In addition, the funds that you initially deposit will be earning interest as long as you keep up with your payments, so you will be putting your money to work at the same time as you are building better credit and benefiting from the convenience of a credit card. Secured credit cards can be a great way to create a credit history or rebuild your credit because this is a low risk for the bank but still gets you a credit card so that you can start using and improving your credit.
If you only want a card for emergencies or for booking tickets or travel arrangements requiring a credit card, then perhaps a prepaid debit card is your best option. A prepaid debit card takes money directly out of an account in which you have already placed funds. This way, you don’t have to worry about interest charges adding to the cost of the items you purchase. No matter which option you go with, the good news is that even if you have bad credit, you still do have choices!