Unsecured credit cards for bad credit situations–is this a good idea? Should you use an unsecured credit card if you have bad credit?
Having bad credit can create situations that prevent creditors from extending credit to customers. It is hard for customers to imagine that past credit situations can prevent creditors from extending credit to them. Many people get secured credit cards and prepaid credit cards to try to rebuild their credit. Prepaid credit cards do not help to rebuild credit. They actually work more like a debit card. Customers load money to the account and use the amount uploaded. The information is not reported to credit agencies so credit does not improve. Secured credit cards work in a similar manner. The credit issuer secures a deposit before customers receive the credit card. The available credit is double or equal to the amount of the deposit. Some credit card companies report to credit agencies but others do not. An unsecured credit card is the best way for those with bad credit situations to rebuild their credit.
Unsecured Credit Cards for Bad Credit–Pros and Cons
Pros of Using Unsecured Credit Cards When You Have Bad Credit
- Unsecured credit cards help to rebuild credit. Credit card companies report payment history to credit agencies. 10% of the credit score comes from new credit, and 15% of credit history comes from credit history. Cardholders have a great chance of raising their credit score quickly.
- Offers for unsecured credit cards may become available as credit improves. Credit card companies check credit and send customers pre-approved credit card applications for their credit cards. There are credit card companies that extend credit to those with bad credit as a part of their special credit programs to help customers rebuild credit. These credit cards come with better offers than many other credit cards may offer.
- Most merchants accept unsecured credit cards. Cardholders can use their credit card at millions of places across the country. Unsecured credit cards come in handy when cardholders need to pay for a hotel or a car rental. The credit card can even be used to make purchases online. Unsecured credit cards offer customers a great deal of convenience.
Cons of Using Unsecured Credit Cards in Bad Credit Situations
- Unsecured credit cards may have many fees that customers must pay. These credit cards may have an application fee that may be as much as $100, a one time processing fee, an annual fee, and a monthly processing fee that can cost $5 to $15 per month. Cardholders may have to pay hundreds of dollars in fees just to use the credit card.
- Cardholders can continue to damage their credit. Cardholders can further damage their credit when cardholders do not pay their bills on time and max out the credit card. It is very important to use these cards responsibly to rebuild credit. Cardholders should only use their unsecured credit card in emergencies.
What to Look for in an Unsecured Credit Card
Customers should look for certain things to determine if an unsecured credit card is in their best interest. The following are aspects that customers should look for in their unsecured credit card:
- Low APR – APR is a very important aspect of credit cards. Cardholders should look for a credit card with an APR in the mid teens or lower. Credit card companies many not offer an APR less than the mid teens because they run the risk that cardholders may not pay back the debt. After cardholders have had a credit card with a company for some time, it may be possible to convince the creditor to lower the APR even more.
- Low Fees – Cardholders should find a card with the lowest fees. Look for credit cards on Internet sites because it is easy to compare the feature to other credit cards for people in bad credit situations.
- Reputable Companies – Cardholders should choose a credit card company that has a good reputation in the credit card industry, and the company should report information to all 3 credit agencies.
How to Get Approved for an Unsecured Credit Card if You Have Bad Credit
Credit card offers for unsecured credit cards are available everywhere. Cardholders can find these offer in the mail or online. Customers must research the credit cards so that they can get the best offer. Approval is fast and easy. A quick application can be completed on line, and cardholders may be approved in seconds. Look for credit card companies that specialized in helping those with bad credit. Many of these companies offer credit cards for just about every credit score, but the terms and fees may vary. Local banks and credit unions may be more likely to approve customers for this type of credit card.
Search, compare, and apply for only the best credit card offers. Do not apply for too many credit cards because doing so can lower cardholders’ credit score. There is a good financial future available for those with bad credit situations.