For people struggling with bad credit, not having access to a credit card can be a major inconvenience. These days, it is virtually impossible to reserve a hotel room, rent a car, book an airline flight, purchase expensive item, or shop online without the use of a credit card.
Fortunately, there are several credit options available for those with a bad credit rating. Consumers should take note, however, that many of these options carry high interest rates or fees, so those in the market for these credit products should be sure to do their research for signing up for a service.
Here is a brief rundown of the best credit card options for people with bad credit:
1. Secured Credit Cards
With a secured credit card, one is required to make a security deposit on the account typically ranging from $100-$500. The security deposit will determine the credit limit (at the beginning) and will be used to cover the debt in case the cardholder is unable to repay his or her obligation.
Since the debt is secured, most people will be able to qualify for this form of credit, and since account activity will be reported to the major credit agencies, it offers those with bad credit a chance to rebuild or repair their credit histories. There is also the possibility of increasing the credit limit without making additional deposits, if the card holder is able to consistently make payments over time.
2. Prepaid Credit Cards
A prepaid credit card looks like a regular VISA or MasterCard, and can be used almost anywhere standard credit cards are accepted. What sets prepaid credit cards apart is that one must preload it with funds, so there is no risk to the credit card company. In this way one is able to shop almost anywhere credit cards are used, but will be unable to go into debt using the card.
Consumers should keep in mind however that not all prepaid credit cards will report account activity to the major credit agencies. There are also a number of set-up and processing fees that may be added to the account, so one should make sure to check the fine print. Finally, some businesses, such as car rentals and airlines, may be reluctant to accept some or all prepaid credit cards
3. Charge Cards
Charge cards work just like credit cards except the monthly balance must be paid in full each month. Unlike credit cards, charge cards do not have a monthly spending limit, and one can make an unlimited number of purchases. Most charge card companies will also report account activity to the major credit card agencies. Many charge cards, however, come with high yearly fees, set-up fees, and even monthly fees and will impose hefty penalties when the balance is not fully paid.
4. Debit Cards
Debit cards work just like credit cards and are accepted everywhere that credit cards are accepted. The only difference is that the money one spends is immediately deducted from a personal bank account. Consumers should keep in mind, that if a card is lost or stolen, the cardholder risks losing the balance of money in the account.
Where to Go to Find the Best Credit Card Deals for Those with Poor Credit
There are several online companies that offer credit card comparisons for those struggling with bad credit. The most popular and comprehensive sites include: bankrate.com, creditcards.com, and creditcardassist.com. Another place to consider is one's local credit union since they generally offer lower interest rates and a more personal approach to banking. The creditunion.coop has a wealth of resources and information about locating and joining a credit union.
In short, there are several credit card options available for people struggling with bad credit. But one should be prepared to do a little research before finding the most suitable deal.
Susan Brown - Susie Brown is a small business consultant and freelance writer specializing in business and personal finance.
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