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”Bad Credit” Credit Cards: How You Can Avoid High Fees
By: Jeff Weber
Individuals with problematic credit histories often suffer unfairly from high
mortgage, insurance, and car loan rates. On top of that, they have difficulty
getting approved for credit cards. The whole situation can get extremely
frustrating. Frequently, I get emails from consumers wondering what they can do
to rebuild their credit. The first thing I tell them is to get a credit card
designed for people with bad credit. The second thing I tell them is written in
bold: READ THE FINE PRINT.
There are only a limited number of credit cards for individuals with bad credit.
At first glance, many look the same. They all help build and rebuild your credit
by reporting to the major credit bureaus on a monthly basis. They all provide
you with the Visa or Mastercard you need to make many purchases. And they are
all necessary evils that can save you thousands of dollars in mortgage and car
loan rates in the future. However, you must read the fine print before applying
for one of these credit cards, as they often charge high yearly fees, set-up
fees, and even monthly fees. Here, I will examine a few examples of charges
current “bad credit” credit cards bury in the fine print. Of the three major
cards I will examine, only one stands out as consumer-friendly.
“Bad Credit” Credit Card #1: This credit card charges a very low interest rate
for an unsecured credit card. However, your first fine print glimpse reveals
that there is a one time setup fee of $29. Not too bad. So far, since the next
charge is a one time fee of $95. So far, we’re up to $124 in expenses. That’s
got to be it, right? No. Add in another $48 for the annual fee and $6 per month
in account maintenance fees. That’s brings the cost of your new credit card to
$244 the first year, and $120 each additional year. This is no small change, and
a card such as this should be considered only if you cannot be accepted for a
better unsecured credit card for bad credit.
“Bad Credit” Credit Card #2: This credit card charges a very high interest rate
for an unsecured credit card. This can’t be good. But the setup fee is only $29.
Maybe this card isn’t so bad. There is that pesky monthly maintenance fee of
$6.50 per month which brings the cost of this unsecured credit card to $107.
Maybe we’ve found a bargain. Not quite. The annual fee is a whopping $150. Yes,
$150 every year. That not only brings the initial cost up to $257, but you will
also pay $228 a year just to maintain the credit card. There has to be a better
offer.
“Bad Credit” Credit Card #3: This credit card is available as both a secured and
unsecured credit card, based on the issuer’s review of your credit history. The
interest rate is average, even competitive. Now, the fine print reveals that
there is a one time setup fee. However, based on your credit, this fee can be as
low as $0 or as high as $49. So far so good, especially if your credit is not
that bad. But, there must be a huge annual fee. Not exactly. The annual fee for
a secured credit card is only $35, and for an unsecured credit card, this fee
can be as low as $39 or up to $79. So far, the cost of this card ranges from $35
to $128. Now its time for the monthly maintance fee. This one has to be huge. Or
not. Its $0. That means the most you could possible be charged to obtain this
credit card is $128, about half of what competing cards are charging.
Clearly, there are substantial difference between “bad credit” credit cards. Of
the three offers we have examined, only one doesn’t take you to the cleaners. In
fact, “bad credit” credit card #3 provides great value. All positive changes to
your credit history and credit score will translate into lower loan rates, lower
credit card interest rates, lower insurance rates, and ultimately, thousands of
dollars in savings. The path to rebuilding credit has its costs, but in the long
term, rebuilding your credit with a “bad credit” credit card is the fastest and
most cost-efficient way to correct the often unfortunate circumstances that have
damaged your credit in the first place.
©2006 Credit Card Depot Inc.
About the Author:
The author is President & CEO of Credit Card Depot Inc., an online information
provider that specializes in the credit card industry. For information on "bad
credit" credit cards, visit www.credit-card-depot.com/bad-credit-applications.html.
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