|
Bad Credit Doesn't Rule Out Unsecured Credit Cards
By: Bill Smith
Many people believe that because of their bad credit, unsecured credit cards are
not available to them. While it may be more difficult, there are options for
people with bad credit who want an unsecured credit card to build their credit
or have available for use in an emergency. While a secured credit card is the
most commonly recommended option for people with bad credit, unsecured credit
cards ARE available - even for those with the worst credit.
Bad Credit: Unsecured Credit Cards vs. Secured Credit Cards
One of the easiest ways to get a credit card when you have bad credit is to opt
for a secured credit card. With a secured credit card, you deposit money in a
bank designated by the credit card company to serve as a 'security deposit' - an
assurance that they'll get their money if you default on payments. Depending on
the lender, that deposit might be equal to your desired credit limit, or
slightly higher or lower. A security deposit of $300, for instance, might get
you a $150 line of credit with one company, a $300 line of credit with another,
and a $400 one with yet a third. The interest rate is generally competitive,
since the company has a guarantee of getting its money if you don't make
payments.
An unsecured credit card requires no security deposit. A bad credit unsecured
credit card will often have either a high APR (annual percentage rate), high
fees, or both. How do the two stack up against each other? Here's a comparison
from two actual credit card offers that are sitting on my desk as I write:
Secured Credit Card
Security Deposit: $250
Annual Fee: $35
Setup Fee: $35
APR: 15.40%
Credit Limit Increases: $100 increments, each require $100 deposit
Bottom Line: It will cost you $370 to maintain a $250 credit limit for the first
year, with at least $250 up front, at an APR of 15.40%. You'll have $170
available credit upon receipt of your card. You'll have to put up an additional
$100 every time you want to increase your credit limit.
Bad Credit Unsecured Credit Card
Annual Fee: $48
Setup Fee: $29
Participation Fee: $72 (annual, billed at $6 monthly)
Program Fee: $95 (one time fee)
APR: 9.9%
Credit Limit Increases: $25 (per increase of $100, at their discretion)
Bottom line: It will cost you $244 for the first year, all of it billed to your
credit card on your first statement, to maintain a $250 credit limit with an APR
of 9.9%. You'll have $72 credit available upon receipt of your card.
In the long run, while a bad credit unsecured credit card may cost you more, you
won't be tying up your money up front. Either card will help repair your credit
as you make payments on time and regularly, but the unsecured card has an APR
that's almost 5% lower. You're the only one who can decide which is the better
option for you - but it makes sense to weigh all your options before you decide
that your only way to have a credit card is with a security deposit.
@ Copyright 2005 - Bill A Smith
About the Author:
Bill A Smith is a credit counselor for
www.americreditservices.com/ Feel
free to visit our bad credit help center at
www.americreditservices.com/bad-credit/ |
