If your credit is not exactly stellar, you might think of getting a credit card for people with bad credit. Apart from having a serviceable card in handy, you can actually gain from it in larger ways.
Rebuilding your credit.
If you have damaged credit and you want to repair it, a secured credit card can be your best friend. It is a credit card that will be backed by a cash deposit – usually $200 to $500 – the amount of the credit limit. This is usually used by those who have poor or zero credit as a way to show creditors their creditworthiness before they can upgrade to or get their first unsecured card.
After getting your secured credit card, make sure you pay your bills on time and in full every month. Doing so will reflect well on your credit report, and lenders will see that you are a responsible cardholder.
To maximize your benefits from a secured credit card, check whether the card provider reports your payments to all credit card bureaus. You need to be sure that your efforts to repair your credit are on record.
Upgrade to an unsecured card.
Yes, you can move up to a regular, unsecured card after a while of using a secured credit card and making consistent and full monthly payments. By then, lenders will have observed that your circumstances have changed for the better and you may now qualify for unsecured credit. Your secured card issuer may even offer you unsecured credit on your secured account, meaning you have greater spending power. But do check the interest rate moving forward as it tends to be high.
Learn better money management.
There’s definitely a reason your credit is what it is, and poor money management skills may just be a factor. A credit card for people with bad credit can teach you some!You could actually learn some from a credit card for people with bad credit. You’ll be more cautious when charging expenses and and more conscious about making on-time payments.
Options for Credit Cards for Bad Credit
When it comes to the best option for people who have bad credit, all fingers point to secured cards. With such cards, you pay a refundable (when you close or upgrade your account) security deposit, which basically protects your provider if you fail to pay.
You have other options, such as unsecured cards for bad credit, which you can have without a deposit but with rather high fees. Finally, you can consider store credit cards, which are easy to get but not without insanely high interest rates and low credit limits.