A quarter of US citizens had what can be considered poor or bad credit ranking in 2013 according to Cardhub.com (FICO score below 600). If you fall into this category it can be difficult at times to find a decent credit card with good terms, or to be approved at all.
How to get a Credit Card with Bad Debt
First off, if you’re a shopaholic that needs to have the latest DVD to add to your mountain of other useless movies, DO NOT GET A CREDIT CARD. The punishing high interest and damage to your credit score heavily outweigh any of the above mentioned benefits.
However, if you’ve made some young mistakes but are looking to slowly build your credit score back up credit cards are an excellent tool to do so. The irony in all of this is the credit card companies will be somewhat apprehensive about lending to anyone with a less than strong credit rating.
Why You Need a Credit Card
Credit cards have become especially popular over the last few decades with the introduction of electronic payments and online shopping. First and foremost they are amazingly convenient and allow a consumer to quickly transfer payment. Most vendors are shooting themselves in the foot by not accepting major credits cards. The problem is their TOO easy to use and often put people with spending problems or financial issues in financial duress.
Using a credit card is a great way to beef up your credit score. The important thing to note is you must consistently pay off your credit card each month/billing period to ensure you receive positive feedback on your credit score. Racking up high balances and consistently making minimum payments will harm your score.
Using a credit card can help bridge cashflow over short periods of time (less than a month). Suppose you have to pay your telephone bill on the 13th of the month and won’t receive your pay check until the 15th. A credit card will allow you to cover this phone payment without incurring any interest.
Secured Credit Cards
A secure credit card is similar to a prepaid card in that you are required to provide money upfront to the credit card company and this amount will be the limit on your card.
For example, if you paid $1,000 upfront your secured credit card would allow for purchases up to $1,000. While you are essentially using your own money to make purchases you still have the convenience of a credit card and will work towards building your credit score once again.
Credit Cards with Less Attract Terms
There are plenty of companies out there that offer credit cards – because they make them MONEY. However, often these companies will offer less than attractive terms on credit cards they provide to people with less than stellar credit scores.
The typical interest rate on a credit card is 18% annually. However, because you WILL be paying your credit card off monthly this shouldn’t matter as much since you will not be using the credit card for things you can’t afford! Expect to be provided interest rates of 25% or more.
Some credit cards charge monthly or annual fees, which makes me want to rip my hair out at the roots. Sometimes you can negotiate with the credit card company to reduce or waive it all together – which I would highly suggest. Fees can range from $50 to much higher and can also depend on the type of rewards offered by the card. However, don’t justify the fee with the rewards as at this point in the game you should be concerned with lowering your overall fees rather than racking up air miles with unnecessary spending!by