Find recommendations for bad credit credit cards
A problematic credit history can lead to highly frustrating situations. For instance, getting a credit card approval becomes difficult. When you reach such a point, a lot of thoughts cross your mind. You start wondering whether there is something you can do to get your creditworthiness back on track. Fortunately, the financial industry has got your back covered.
Bad credit credit cards exist for the sole purpose of assisting individuals to continue making purchases while building their credit at the same time. However, before you apply for one, you must carefully sift through what the industry provides. Often, these cards attract setup, monthly and yearly fees.
At the onset, these charges may not seem like much as they are hidden in fine print. As you continue with the card utilization, that is when you realize how costly it is to maintain.
Comparing bad credit credit card offers, and avoiding exorbitant fees
To gain an understanding, let us examine the fine print for three sample cards, A, B, and C. Here’s how you can compare and make sound decisions on credit card selection:
- Card A
As you peruse through the issuer’s write-up, you notice that the card has an initial $200 credit line. You reckon that you can afford such an amount. After all, the deposit will be refunded later. However, further reading reveals a set-up fee of $29. A little voice in your head tells you that the cost is not bad at all. In any case, you only pay it once. Next is an annual fee pegged at $48 plus a $6 monthly maintenance fee. Now, take a moment and digest what you are up against.
• $29 set-up fee
• $48 annual fee
• $6 maintenance fee per month
If we put these numbers together, having the card in your possession will cost you $349 in the first year only. After that, you will have to part with $120 a year. Mind you, we have not considered the rate of interest on purchases.
- Card B
Our second card is an unsecured credit card. The issuing bank has placed a set-up fee of $29, same as in Card A. Again, and the amount looks reasonable. Wait until you examine further and notice that the card has a $6 maintenance fee billed monthly. Now, look at the cost up to this point – it’s $101. Compare this with Card A, and it seems like Card B is a good bargain. As you keep looking, you come across the annual fee $150. This far, the card has an initial cost of $251. Besides, the yearly maintenance cost is $222. So now, Card A has the lowest annual fee. Keep going and examine the third card. Perhaps it will be the best option.
- Card C
Credit card C looks promising as it offers you the option of transitioning to an unsecured credit card upon a credit history review. It also requires a refundable security deposit. There is some good news; the card company charges a set-up fee on a sliding scale of between $0 and $49 depending on your credit score. As for the annual fee, the lender levies you $35. When you graduate to the unsecured card level, the fee ranges from $39 to $79. Up to this point, the card has a cost of between $35 and $128. As we did with credit cards A and B, we cannot conclude the comparison without checking for the monthly maintenance fee. Fortunately, the lender has decided to be lenient and pegged the charge at $0. In a nutshell, the cost of obtaining Card C is $128, which is way cheaper than what you would pay for Card A and Card B.
The above is just an example of how you can evaluate offers on secured credit cards. By using a similar approach, you can quickly tell and point out a card whose terms translate to high value. Rebuilding credit is not an easy task.
In the long run, you need to sustain your reputation for credit with responsible utilization. The goal is to find cost-efficient ways to correct circumstances that led to your present state. Always check the fine print as that is where you will see the “hidden” costs.
Financial institutions want to lure you with reduced costs and rewards. To draw your attention, they put these words in bold print. Once you sign up, you later discover that the deal was not as cheap as you had earlier thought.
The remedy is to dig through the fine print and unearth the real cost.
A carpenter’s hammer and a credit card – similar importance
Just like a carpenter considers a hammer as an essential tool, you cannot underrate a bad credit credit card, it builds credit. If used correctly and responsibly, this tool adds convenience to your financial life. It also helps you develop a history of being a reliable person who promptly pays bills. Besides, financial institutions offer rewards to cardholders.
These include cash back rebates, discount on gas purchases and shopping as well as frequent flyer miles. To tap into these benefits, you must first figure out what a card can do. Then, compare the goodies offered with your financial goals.
As a consumer with a bad credit history, go after cards that will help you restore your creditworthiness.
Use your card, do not just keep it or be afraid of using it
Being in possession of a secured credit card requires that you pay off the debt promptly. If not, you risk accruing interest and attracting penalties on what you owe. By doing nothing, the debt rolls over and starts accumulating to levels that catapult you to misery.
Secured credit cards are powerful credit building tools – the cash deposit that you make when signing up acts as a back-up. The amount is also your credit limit. Once you obtain one, go ahead and use it like any other card.
Make payments and buy the things you love. However, remember that the card is not for your use forever.
The objective is to help you improve your status and qualify for incentives that come with good credit.
Improving your credit history – a task that calls for lots of effort
Turning your credit history from negative to positive takes time. You cannot achieve this feat overnight. You must also put in a lot of energy. Nonetheless, the duration depends on your starting point. Perhaps, you do not have a credit history or are working to rebuild a troubled one. Besides, you must define your goals. Whatever the situation, you must be on point when it comes to payments.
First, make your monthly payments on time, credit reference bureaus treat this with great importance. Second, settle your credit card balances. Set some goals and go all out to achieve them.
Think of something you wanted so badly in the past and recall the things you did to get it. Apply the same energy, stay focused and be committed.
Watch your FICO score keenly – your life depends on it
After you open your account and obtain a credit card to start utilizing and paying your bills promptly, you will realize that your credit history begin to improve.
Credit reporting agencies assign you a score, a financial obligations reliability predictor. Nearly all (about 90 percent) lending institutions in the U.S. refer to a consumer’s FICO score when determining their risk.
Equifax, Experian, and TransUnion are the three leading agencies that provide this credit score. However, each agency has a different way of calculating the score. Therefore, expect some slight variations when you obtain credit reports from the three.
Anyway, the FICO score falls between 300 and 850.
Payment history accounts for 35%
What you owe accounts for 30%
The duration of reviewing your credit history accounts for 15%
The forms of credit utilized over the period under consideration takes 10%
If you apply for a new loan, it accounts for 10% of your FICO score
A credit rating of 800 and above is exceptional but challenging to achieve. Anything between 740 to 799 is excellent and comes with attractive benefits from the credit industry. A score that ranges from 670 to 739 is in the median range.
Most lenders accept this, but you should strive to keep yours at above 700. At 580 to 669, you are below average and stand a high chance of having your credit or loan applications rejected. Even if you succeed, the loan products you secure will come with very high rates of interest.
Finally, a score of 579 and anything below this is poor plus no lender can offer you a loan.
Bad credit credit cards that you can use
By utilizing your credit card and making monthly payments on time, the lender reports the activity to the three credit reference bureaus monthly. They track your purchases and payments so never miss or fall back on settling your bills.
Below are examples of secured credit cards that you can apply for even with bad credit:
First Progress Platinum Elite MasterCard Secured Credit Card
The card requires a refundable security deposit of $200 all the way to a maximum limit of $2,000. You must submit this when applying for the card. You can use it at a hotel of your choice or for car rentals if the entity accepts credit cards.
The issuing authority reports to all the major credit agencies, which is a plus for you. Besides, the lender does not require you to have a minimum credit score or previous credit history. Also, the First Progress Platinum Elite MasterCard Secured Credit Card provides you full access to your online account any time of the day or night.
For foreign transactions, there is a 3% fee plus you must pay $29 every year as the annual fee.
The Surge Mastercard is an unsecured card that does not require an applicant to pre-qualify. The issuer requires no deposit from an applicant.
Furthermore, the card reports to the major credit agencies. You can use it to improve your damaged credit status. If you have a low FICO score and are struggling to get approval elsewhere, the Surge card is a welcome relief.
On the other hand, the card has a $500 maximum spending limit. Despite the high annual fee, there is relief in knowing that it drops from the subsequent year onwards.
DCU Visa Platinum Secured Credit Card
Do you have a low credit score? Are you seeking to improve your credit history? If you answered ‘yes’ to these two questions, the DCU Visa Platinum Secured Credit Card is for you.
Being a secured credit card, you need to pay a security deposit on approval. Besides, you must belong to the DCU Federal Credit Union.
The annual fee is $0 plus the card has a variable interest rate of 13.25 percent. However, there are no cash backs or point rewards when you use the card, but you can look at the brighter side when your credit improves.
Also, if you use the DCU card for car rental, you automatically obtain waivers on theft and collision damage. On the other hand, the card company provides a $500,000 travel accident insurance on tickets purchased using the card.
Deserve Edu Mastercard
If you are a college student, the chances are that you have no credit history or where present, very limited. In that case, the Deserve Edu Mastercard will fit into your plans.
The card charges no fees on foreign transactions plus there is a waiver if you get late on the first payment. There is a one percent cash back on purchases, and you can enjoy the credit limits of up to $5,000.
As a bonus, you do not pay a security deposit. However, Deserve always verifies bank balances for all applicants. Expect them to check this with your bank.
For international students, you can enjoy access to airport lounges but at the cost of $27 per visit. As a bonus, the issuer throws in $600 as cellphone insurance.
Fingerhut Credit Account
Fingerhut has been in business since 1948. The Fingerhut Credit card has no annual fee for cardholders.
There are two types of accounts that you can sign up for, i.e., the Fingerhut Advantage Revolving Credit Card Account and the Fingerhut FreshStart Credit Account. You can use it to build your credit since WebBank, the issuers report to all major credit agencies.
However, Fingerhut charges a 29.99% annual percentage rate (APR) on purchases. To avoid paying interest, you only need to pay the entire balance when it falls due. Your bills fall due 24 days after the end of the billing cycle.
There is also a late fee of up to $38 and a similar returned payment fee. Fingerhut offers you credit to buy items such as electronics, jewelry, bedding, and furniture.
Coming from the point of poor, low or bad credit, you are undoubtedly eager to see improvement. Let no one mislead you – fixing your credit cannot take place overnight. However, you can lay down the foundation today and begin to enjoy the fruits of your effort in a few months to come.
Credit cards for people with bad credit are not a means to an end but a bridge to help you cross over to the other side. Before you sign up, take a few days to get acquainted with how these cards work. Sift through your life carefully.
Ask yourself what led you to the poor credit state in the first place. Did you overspend? Did you miss payments? If you paid, were you late? Did you live beyond your means? By understanding where you are coming from, you stand a better chance of avoiding the mistakes you made.
Obtaining a secured credit card is one of the ways to rectify lousy credit. You put down money to a bank or financial institution which also becomes your credit limit. Like is the case with other credit cards, you must keep paying your bill on time every month while also maintaining a low utilization ratio.
Every month, card companies report your behavior to the credit bureaus. You will do well to avoid doing things that would jeopardize your credit report. At the same time, follow your credit activities closely by obtaining credit reports and scrutinizing them.
Ensure that the information they contain is always accurate. In case of mistakes, deal with them quickly without procrastination. Seeing that you are entitled to one free report from the three major credit agencies, there is no harm in paying the required fee if that is what it takes to have regular access to your credit reports.
Alex is a former budget manager turned entrepreneur. He works mainly at home on his credit score advice website and writes a financial blog on the side. He hopes to expand his business into a full online lending company for bad credit as soon as he gets enough investors.