Bad Credit Cards

The market for bad credit cards has changed dramatically in the recent years. This is a result of two factors:

  1. Credit Crisis - The credit crisis caused many banks to tighten their purse strings due to necessity. The federal government was performing 'stress tests' on the banks and they needed capital. Thus, they increased rates on all credit cards including those for individuals with good credit and shrank everyone's available credit.

  2. New Bad Credit Lending Legislation - As a result of the credit card issuers increasing rates the government once again got involved and decided that they were going to 'cap' credit card fees and interest rates.

    As bad credit lending is one of the most risky forms of lending this also carries the highest fees and charges - we believe it is debatable as to if these fees are exorbitant. There were a lot of individuals choosing to get these credit cards.

    The bottom line is an unsecured bad credit card will help you to create positive credit and fix a damaged score the quickest. Unfortunately due to the above two reasons these cards are no longer available.

Your Options For a Credit Card with Bad Credit

 

While the options have changed there are still many to choose from. Each will carry varying approval requirements we have listed each type, how they work and our thoughts below.

  1. Unsecured - these are traditional credit cards. You are extended a card with a credit limit and will be charged monthly bills. However these cards will have a low credit limit typically between $300 - $500. Additionally you will be paying a higher APR%, often around 19%.

    As mentioned earlier these cards are no longer on the market. We have come across a few cards that have already found a way to side step government legislation.

    These cards carry an unbelievable 36% interest rate and require you to pay a $78 annual fee, and then a monthly fee of $8 or $96 annually. Additionally you must pay a security deposit of $95 upfront - we believe this security deposit is what makes this card 'legal' - regardless we don't encourage you to get this. There are much better, cheaper and more intelligent options.

  2. Secured - these credit cards will first require you to make a deposit with the bank. For example you would have to first deposit $500, and then you would be issued a credit card. Your limit would be $500 or equal to the amount of your deposit, you can choose often between $200 all the way up to $5,000.

    These are good choices because they will report monthly to the credit bureaus giving you an opportunity to build credit. While it is vital to build positive credit it is also important to remove any negative items and repair your credit report.

    This will be a major Visa or MasterCard and will work the same way as an unsecured card. You will be responsible to make monthly payments and be charged and interest rate. However your interest rate will be much lower because your account is secured. This deposit is fully refundable and FDIC insured - it acts as a guarantee for the bank that they wont lose money.

    We recommend the Orchard Bank Credit Card. They have a unique application process where if your credit is good shape you could be offered a unsecured credit card. You then choose what card you want. Your application is processed in 30 seconds.

    You are guaranteed to be approved for a secured card with them! The card will report monthly to the major credit bureaus and just by paying your bill on time every month you will start to create a trail of positive payment history - this is very important to your credit score!

  3. Prepaid - these are also called debit cards. To use them you must first deposit money on your card and then it can be used for purchases.

    It will be come as Visa or MasterCard and give you free direct deposit. If you are currently paying check cashing fees - STOP - and get one of these cards! Additionally some cards will give you free online bill pay.

    This is an easy and convenient way to pay your bills. You just log into your online account, fill in the business or person you want to pay, the date you want them paid, the amount, and your finished! A check in your name will be sent - free of cost no buying a money order and you don't even have to pay for a stamp! Using this and free direct deposit can really save you a bundle of money - in avoidable fees!

    Your card can be used all over the world. You can use it online and over the phone. And you can: buy gas at the pump, rent a car, book airfare, rent a hotel room ... In other words it will give you the same purchasing power as everyone else with a major Visa or MasterCard.

    We recommend the AccountNow Prepaid Visa. It gives you free direct deposit and free online bill pay. You also get free text alerts, free activation, and a free $25 bonus! There is no credit check or chexsystems check and you will never pay a bounced check fee or overdraft fee again!

AccountNow Prepaid Visa - Click Here to Apply

 

Lastly we must mention one other type of bad credit card. The dreaded shopping / merchandise / catalog credit card. These should be avoided like the black plague!

 

They are marketed as unsecured credit cards. However this card can only be used at one location - typically online or through a catalog. In other words you can use this card to buy gas, purchase groceries, or buy anything other than from one company that just happens to be the same company that issues you the card.

 

Needless to say these are HORRENDOUS cards and are not credit cards. They rarely will report to a credit bureau and will charge you all kinds of fees! Please! Whatever you do - do not choose this route! There is NO redeeming factors about these cards. When you make a purchase you are charged shipping and handling and we have heard the products that are sold are complete junk and overpriced!

 

What Should I Do?

 

We would encourage you to get a prepaid card or a secured card and take steps to remove bad credit from your report. You don't have to just live with a low credit score - In fact you are entitled to dispute the negative items on your report - Congress passed laws that say you can do this!

 

It's called the Fair Credit Reporting Act and it was passed in 1970. Next time you hear someone say credit repair is illegal or you have to just live with bad credit for 7 long years - tell them to go read this Federal Law!

 

You can get a free credit consultation by calling 1-800-483-0256

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