Friday, September 12, 2008

Things You Need To Know About Bad-credit Cards

Thankfully, such people still have hope in the form of bad-credit cards. People can indeed recover and repay all their debts but once that is done, getting credit cards to start their debt-free life would become a near-impossible feat. Sadly a lot of people do spend to much that they turn out indebted, unable to pay for their bills and eventually unable to get credit cards anymore.

These days, credit cards have become a necessity as it provides people with spending power even if they do not really have all the money they need.

But such are prices that people with bad credit are willing to pay because they do recognize the importance of credit cards in today???s society. The downside with bad-credit cards however, is that their interests rates could be higher, they might have higher joining and annual fees, or they might require collateral. Bad-credit cards are charge cards that people with bad credit histories can apply so that they can get normal credit cards.

There are many different kinds of bad-credit cards but they can mainly be categorized as prepaid cards, secured cards and unsecured cards.

Prepaid Bad-Credit Cards ??? these cards are actually just debit cards specifically catered to people with bad credit. To get one, you only need to open a bank account and deposit at least the minimum required money. This amount would serve as your ???credit limit???. Each time you purchase with your card, money is deducted from your account and if your money runs out, you will not be able to use the card unless you deposit funds again.

However, this is not at all a credit card because you are not really borrowing money, and thus it will not really improve your credit rating. Nevertheless it provides people with the conveniences of credit cards even if they are not able to apply for a real one due to their bad credit.

Secured Bad-Credit Cards ??? these are as good as credit cards, however to apply for one, you would need to open a savings account, the money deposited in which would be secured as a collateral by the issuing bank. The credit limit is determined by the amount deposited, or sometimes a little more than that to allow the cardholder some allowance. If the cardholder fails to pay, the bank may take hold of the money in the savings account.

Like other bad-credit cards, the interest rates and other fees are bound to be higher than regular credit cards. Also, some banks may not report such accounts to credit bureaus so it is important to make sure that the bank does submit such reports if the purpose is to improve the cardholder???s credit rating.

Again, it is important to make sure that the issuing bank does report to credit bureaus to ensure that the credit rating does improve. But it is usually considered worth it to pay such a price because they can really improve one???s credit ratings. Such cards usually require large upfront fees, and interest rates can be as high as 25% while annual fees may go as high as $100.

A cardholder may start with a low credit limit, around $250, which will increase little by little if the account is kept well. these work like regular credit cards however the fees and interest rates are considerably higher than normal cards. Unsecured Bad-Credit Cards ???

Thanks to bad-credit cards, people still can stand a chance. People with bad credit rating may still have a chance to get their credit cards.


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