There are more and more companies offering credit cards even people have bad credit. Therefore, if you have poor credit, you do not worry so much. This post, we introduce to people about the credit cards for people with bad credit.

Credit cards for people with bad credit
Two types of credit cards for people with bad credit

In the previous post, Info Credit Free introduces people to some of the necessary information that is useful for getting the best credit card offers in the US, to get more information people can read the article Somethings about student credit cards people should note. Now, let find knowledge about the credit cards for people with bad credit in the post today.

CREDIT CARDS FOR PEOPLE WITH BAD CREDIT

Just like a lot of article posts such as instant approval credit cards, low-interest credit cards, pre-approved credit cards, best credit card offers…, this post about credit cards for people with bad credit also includes some main parts. They are:

1. Some types of credit cards for people with bad credit

1.1. The secured credit cards for people with bad credit

Credit cards are guaranteed to be designed exclusively for new users trying to set up credit history or search for credit cards to rebuild credit. They operate in the same way as traditional cards, with no guarantee except that they require users to deposit cash against the credit line. Deposits protect lenders in case of default.
Cash deposits on secured credit cards are typical $ 200 to $ 500 or 50 percent to 100 percent of the credit limit. The lender puts that money into a safe account and depending on the bank, you can accumulate interest on your deposit as a traditional savings account. As long as the security card is activated, you cannot withdraw those funds. If you miss your payments, lenders use deposits to pay balances.

A security card is not a prepaid credit or debit card; The payment cycle works like a standard credit card. When you purchase goods with your card, you must pay on the card balance. Creditors only use deposits as an emergency backup plan and it is considered the same as the default on traditional credit cards.

Benefits of guaranteed credit cards for people with bad credit:

  • Approval is easier because they present less risk to lenders
  • APR is lower than most cards with no guarantee of bad credit

Drawbacks of secured credit cards for people with bad credit:

  • High-security deposit
  • The credit limit is low, making it difficult to maintain a low utilization rate

1.2. The unsecured credit cards for people with bad credit

Credit cards are not guaranteed that traditional cards are not secured by deposits. They are cards issued by a financial company that owners use to borrow money to pay for purchases. Credit cards allow you to buy things using the creditor’s money, with an interest-back agreement if you carry the balance. In fact, they are a way to access a small, instant loan directly at the point of sale for any item.

How do unsecured credit cards work?

Unsecured credit cards come with a credit line, which is the maximum amount you can spend on the card. Your credit limit is primarily determined by your credit score and income. The higher each person, the higher your limit. The amount you spend on the card is your balance.

If you do not pay the full balance after each payment cycle (your grace period is usually 21 to 30 days), it will begin to accrue interest at the established annual percentage (APR ). Like most credit cards, credit cards with no security for bad credit also come with additional fees.

Credit card restrictions are not guaranteed for people with bad credit:

Benefits of credit cards are not guaranteed for people with bad credit:

  • There is no security deposit
  • Higher credit limit

Drawbacks of unsecured credit cards for people with bad credit:

  • High interest rates
  • High annual fees
  • Monthly maintenance fees

Here are two popular cards for those with bad credit provided by the same bank, a guaranteed card and one not guaranteed:

Card Interest rate Initial fee Annual fee Monthly fee Minimum total first-year cost Total second-year cost
Total Visa Credit Card (unsecured) 29.99 percent variable APR $89 processing fee $75 first year; $48 starting in the second year $0 first year; $6.25 starting in the second year $164 $123
Verve Mastercard (unsecured with secured option) 30.49 percent variable APR $0, $50, $100, $150 or $500 security deposit $125 first year; $96 starting in the second year $0 first year; $10 starting in the second year $125 $216
Credit cards for people with bad credit
Two types of credit cards for people with bad credit

2. How can you evaluate credit cards for people with bad credit

2.1. Annual fee

Most credit cards for bad credit (guaranteed and unsecured) charge an annual fee to maintain the account. The amount of the fee is charged directly to the balance in a large annual amount or divided into monthly installments. The annual fee will accrue interest if you do not pay off at the end of the billing cycle.

Since there are very few poor credit cards with no annual fees, you should look for cards with the lowest possible fees.

2.2. Additional fees

You will find all the additional fees of the card on the terms and conditions page. Fees associated with bad credit tend to be much higher than standard cards.

Fees may vary from year to year, so be sure to calculate your annual and monthly costs for subsequent years to find out which cards have the best long-term value.

2.3. APR and penalty APR

The current national average APR is 16.87 percent for standard credit cards. In the US credit card directory, the average interest rate for credit cards guaranteed for bad credit is about 19 percent and the average for unsecured cards is 29%.

Some cards with higher APRs are activated if you miss a payment. The penalty rate is usually 6 to 8 percent higher than the standard APR, so you should search for a card without a penalty rate.

Some companies will keep the interest rate unchanged until you make some payments on time and on time; others lock it indefinitely.

2.4. Foreign transaction fee

Many credit cards that charge foreign transactions may range from 1 to 5 percent of the total number of purchases. Fees include fees for handling international payments and currency conversions. If you will be using your card outside the United States regularly, consider a card with a lower charge or a card that does not charge a foreign transaction fee.

2.5. Possible credit limit increases

Credit cards for people with bad credit often have a very low starting credit limit. Some cards limit your limit, but many cards will increase your available credit if you demonstrate that card use has a consistent responsibility.

As your credit improves, you may want to have a higher limit so you can use it to buy goods regularly or get extra credit in an emergency. Higher credit limits will also help reduce your overall usage rate.

2.6. Reporting to three bureaus

Getting a credit card to repair your credit will help improve your position with three major credit bureaus: Equachus, Experian and TransUnion.

If the card you chose does not report your account history to those three agencies, you will not rebuild your credit. Nearly all credit cards are secured and unsecured traditionally reported to three monthly offices. There are a number of smaller banks, credit unions, storage cards and credit portfolios that only report to one of the three (or nothing).

Before you sign up for any card, make sure they report to all three agencies by checking your card’s terms and full credit agreement. If the information is not there, contact your customer service agent with the lender.

2.7. Rewards

There are a number of subprime cards (mostly secured) that have rewards programs. Since you will use your card regularly in an attempt to rebuild your credit score, try to find one that will give you an extra bonus along the way.

This post is about Two types of credit cards for people with bad credit. We provide this information to offer you some of the necessary information that is useful for getting the credit cards for people with bad credit. Also if you are using credit cards and would like to know how to borrow money, please refer to the personal loans for people with bad credit link we just provided in the previous article. 

Hillary (Team Content) – Info Credit Free