How To Get A Credit Card With Bad Credit
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How To Get A Credit Card With Bad Credit

One of the major disadvantages of having bad credit is that you will frequently have trouble qualifying for a credit card.

As we all know that can be a major problem because many businesses, including hotels and car rental agencies will not do business without you providing a credit card.

Failure to own one may also mean you can't make purchases online as well. All in all, not having these pieces of plastic can be a major inconvenience.

These credit cards are the best for racking up travel rewards.

Credit card issuers rely on the potential applicant's credit histories to assess and determine whether they should be issued credit cards. A poor credit history will tell credit card companies that an applicant may not have the resources to pay bills on time or regularly. Because of this, many aspiring cardholders fail to get their own credit cards.

However, more and more companies are offering new products and services for people with poor credit histories. While it may be counter-intuitive, a credit card for people with bad credit can spell the difference between a company's failure and profit.

Because of a large number of applicants turned down by many banks and credit card companies, some issuers have opted to provide these rejected consumers with the opportunity to regain and restore their credit histories. Right now, an individual with no prior credit history can get a credit card for people with bad credit.

Basically, there are two main types of a credit card for people with bad credit, unsecured and secured. unsecured credit cards are just like the standard credit cards but with lower credit lines and higher fees. Secured ones are backed by a bank deposit. The money in the bank account serves as security for the card.

Customers with unsecured credit cards are judged based on their credit histories, income potential, and financial strength. On the other hand, secured credit cards require collateral, in this case, a bank deposit, for them to be approved.

A credit card for people with bad credit will allow a consumer with bad or no credit history to start with a clean slate, so to speak. Most issuers offer new credit cards for minimal or no fees at all. Some even include 0% APR or annual percentage rate for the first 6 months. In almost all cases, credit card companies and banks guarantee applicants 100% approval. Despite this, their credit lines can be much lower than standard credit cards, ranging from $5,000 to $10,000 for some cards.

One way to manage the problem is to take out what is known as a secured card. These are backed by a deposit you make to cover the costs you charge on the card. At first, this may not sound like much of an advantage, especially if you are strapped for cash. This type of arrangement can help you to build your credit back up to a reasonable number while also providing you with the convenience of possessing a credit card for renting cars, reserving hotel rooms, etc.

Depending on the company you elect to go with, you may be able to obtain a secured credit card with a credit limit as high as the deposit you can afford to make.

Another option is to purchase a pre-paid card. You may wonder how that is different than a secured option. With a pre-paid card the money you pay for the card goes directly to the expenses you charge on it. This is different from a secured card because you are responsible for making the monthly payments on it for the expenses you charge. The security deposit is just in case you don't pay back the money.

You might also wish to obtain a credit card offered specifically for those individuals with bad credit. While this type of option will get you the credit card you need it doesn't come without drawbacks. You'll probably be charged the highest interest rate allowable and your maximum credit line will probably be quite low. When you first take out the card, you can expect for your credit line to only be about $250 or perhaps even less. As you make payments on time, pay off the expenses you charge and make an effort to keep your balance below the maximum credit, and you may qualify for lower interest rate and credit line increases.

Regardless of which method you decide to use when obtaining a credit card for your bad credit situation, remember there is generally a reason why you have a bad history. It may have been due to a financial hardship that is now no longer a problem but is sure to use discretion and good judgment to ensure you don't create even more financial problems.

Ari Socolow
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to bank transparency and the climate crisis. Since co-founding BestCashCow in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.

Editorial Disclosure: Opinions, reviews, analyses & recommendations are the author's alone, and have not been reviewed, endorsed or approved by any of these entities.

User Generated Content Disclosure: Responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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