When your credit history gets dinged by late payments on your bills, you might be thinking that aren’t any viable options for getting a credit card. Over the past 12 to 24 months, many US consumers have seen their credit scores drop because of the economic downturn that we have been experiencing in this country. If you’re in this type of situation, don’t despair because there are credit cards for bad credit available to many consumers.
There are basically 3 types of credit cards that you can apply for and oftentimes be approved for when you have bad credit. These are:
Pre-paid credit cards – just as the name implies, you get out of this credit card what you put into it. It’s similar to a checking account in that you deposit funds into this type of credit card account.
Secured credit cards – these types of credit cards require that you deposit funds into a separate type of account (usually a savings account) which is used to secure your credit card account.
Unsecured credit cards – a regular type of credit card requiring no securing deposit into another interest-bearing account. The worse your credit score is, the lower your spending limit will be with an unsecured credit card.
What to watch out for
It can be pretty challenging when you start applying for credit cards when you have bad credit. Many people are unaware of the things you need to watch out for. Here are three aspects to be aware of when you are looking for credit cards for bad credit:
Bonuses and perks offered – first of all, many banks will advertise bonuses or perks to entice you into signing up for one of their credit cards. Although they may offer airline miles or even cash back bonuses, they typically have higher annual membership fees and interest rates.
Deposits required – deposit amounts will vary from one bank to the next. Depending on your situation, the deposit required may only be a few hundred dollars. However, it could also be as much as a few thousand dollars. So you want to do your research.
Conversion features – most of the time this feature allows you to convert from a secured credit card to an unsecured one after your payment history is maintained positively for several months. Interestingly enough, most banks that issue credit cards for bad credit don’t tell you this because they don’t want you to know that option is available.
There are some instances where you may be declined when you apply for credit cards for bad credit. Most of these instances are related to how bad a person’s credit history has gotten. In the worst case scenario, you always have the option of a pre-paid credit card. Most of the time, you get approved for these without the credit history check that secured and unsecured credit cards require. Additionally, you want to make sure that information you provide on your application is as accurate as possible.