Benefits of Owning a Credit Card for Bad Credit
If your credit is far from decent, you might want to want to apply for a credit card for people with poor credit. Besides being a working card at your disposal, it can actually offer long-term benefits.
Improving your credit.
If your credit is in poor shape but you’re determined to fix it, you can do just that with a secured credit card. It is a credit card that will be backed by a cash deposit – usually $200 to $500 – the amount of the credit limit. This is typically used by people with bad or no credit history to demonstrate their creditworthiness to lenders or creditors before moving to or securing their first unsecured card.
After getting your secured credit card, make sure you pay your bills on time and in full every month. Doing so will reflect well on your credit report, and lenders will see that you are a responsible cardholder.
To maximize your benefits from a secured credit card, check whether the card provider reports your payments to all credit card bureaus. You need to be sure that your efforts to repair your credit are on record.
Move up to a regular unsecured card.
Yes, you can move up to a regular, unsecured card after a while of using a secured credit card and making consistent and full monthly payments. By then, lenders will have noticed the improvement in your situation and deem you responsible enough for unsecured credit. Your may even be rewarded with some unsecured credit on your secured card, boosting your spending power. But do check the interest rate moving forward as it tends to be high.
Lean to handle your money.
There’s likely a reason behind your bad credit, and usually, it has something to do with poor money handling skills. You can learn some by using a credit card for people with bad credit. You’ll learn to think twice about what you charge and make sure those payments are made on time and in full.
Options for Credit Cards for Bad Credit
So far, secured cards seem to be the best options for people with poor credit. With such cards, you pay a refundable (when you close or upgrade your account) security deposit, which basically protects your provider if you fail to pay.
You have other options, such as unsecured cards for bad credit, which you can have without a deposit but with rather high fees. Lastly, you might consider store credit cards which are much easier to get, but usually with low credit limits and high interest rates.