Secured Credit Cards
If you have bad or no credit, the only credit card you are likely to be approved for is either a secured credit card or an unsecured credit card with very high fees and interest rates. This latter type of card is a bad choice, but is often picked by those with bad credit because the idea of sending in a security deposit to obtain a credit card is somehow beneath them.
Too many of the credit cards being offered to those with bad credit are outright scams. For example, many bad credit cards come with a $500 dollar credit limit, but require a $125 initiation fee; a $100.00 annual fee; $20 monthly fees; and a $250.00 registration fee. So what is left over after you apply and get this credit card? A few dollars and a lot of debt. Companies who market this type of credit card claim they must charge such high fees and such in order to compensate for the high default rate of their customers, but critics argue they are just taking advantage of the poor and those who can't get legitimate credit cards.
It is always a better option to get a secured or partially secured card from one of the top credit card issuers in the country. Most of the top credit card companies, such as Capital One, Bank of America, and Wells Fargo offer secured cards to those who need to rebuild their credit. Applying for and getting these types of cards is definitely worth sending in a deposit to secure your credit limit. Establishing credit with a well known credit card issuer will also guarantee that (1) your excellent payment history is being reported to one, but usually all three major credit bureaus, and your credit score is being improved; and (2) if you "behave yourself" and always pay as agreed, it is likely that the credit card bank will one day offer you an unsecured credit card with a respectable limit, which you can use to go on trips and such (but please don't run up a big balance on it that you can't pay off within two months).
It just doesn't make any sense to get a credit card for those with bad or no credit that charges you $200 or more per year in ridiculous fees. Why not send in a $500 deposit to a Top 10 credit card issuer and pay a $29 or $39 annual fee? Note that with a secured card from a legitimate credit card issuer, you will one day get your deposit back (provided you live up to your end of the agreement and don't default on the account), plus a small bit of interest earned while the issuer holds your money as collateral. You will never get back the hundreds of dollars in application fees, set-up fees, monthly fees, maintenance fees, and initiation fees paid to a fly-by-night unscrupulous credit card issuer.
Watch out for terms like "guaranteed approval", "zero introductory rate", "get the card right now" language when shopping for an unsecured credit card because the sign-up fees will be very high. Always read the terms and conditions of the credit card to determine how much you will have to pay in assorted fees before you apply for the credit card.
Tired of only qualifying for secured credit cards?
There are steps you can take to start improving your credit rating. With effort and discipline, you can one day obtain a credit score of 750 or higher, which would mean you could apply for mortgages, auto loans and credit cards online and be instantly approved. All you have to do is (1) not accumulate too much debt; (2) pay down existing debt; and (3) pay all bills on time.
Congress passed the Fair Credit Reporting Act so that people with bad credit don't have to pay for it the rest of their lives. No matter how low your credit score is today, you can one day achieve a high credit score. END OF ARTICLE