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Bad Credit Credit Cards > Should You Apply For 'Bad Credit' Cards?
Should You Apply For 'Bad Credit' Cards? |
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There are many bad credit cards out there that prey on those who have poor credit. When you have poor credit it can be frustrating because no one will give you a credit card, so when you are finally able to find a company willing to extend credit to you, you are willing to pay almost anything for this second chance. It is not uncommon for somebody with poor credit to receive an offer for a $300 bad credit card that already comes with $250 worth of fees on it. This means that that person must pay down the $250 in fees that is already on the 'bad credit' card, before they can even think about really using their new card.
After these fees are paid down, the companies that issue these 'bad credit' cards will still continue to charge a $100 fee for each and every year that that consumer keeps their card, as well as a $25 fee each time the credit limit is raised. Once a consumer has good credit these 'bad credit' cards still plague them because closing it could hurt their new credit rating. This is because this 'bad credit' card will be their oldest credit account with a positive payment history. Since your FICO score takes the length of time your accounts have been established into consideration when determining your creditworthiness, closing this good account could actually hurt the consumer's credit score. These 'bad credit' card companies know this and that is why they try to target those who are looking to restore their credit rating. They know they will be able to get collect fees for years upon years from these consumers, until the consumer's other cards have aged enough to lower the impact of closing these 'bad credit' cards. So what's the solution to 'bad credit' cards? A good secured card. Many nationally recognized banks offer secured credit cards to consumers who have bad credit. To do this, you will send the bank a deposit in return for a card that has a credit limit equal to your deposit. You will still use the card as you would any other credit card, even incurring interests -- if you decide to revolve the balance -- and late fees. The only time your deposit is ever taken in consideration is if you default on the card. At that point the bank will take your deposit -- in return for the money that you owe them -- and record this negative credit history on your credit reports. Once you have maintained this positive account for a certain amount of time, the bank will unsecure your card and give you your deposit back. They may even increase your credit limit as a bonus. A secured credit card is much better than a 'bad credit' card that charges you tons of fees, because you will eventually get back whatever money you put into your secured card -- assuming that you do not default on the account. Many times, when the bank "unsecures" your card, it will also allow you to keep the history on your credit reports. So, instead of showing your secured card account closed and a new account opened, it will just continue to report on the same tradeline that it always has when it switches over. In the end, you will have spent no money to get this great unsecured credit card and you will continue to maintain the account's history at the same time. No high-fee 'bad credit' card can offer you so much. |
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