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The Best Credit Cards for People with Bad Credit

Sunday, March 3rd

What Are the Best Credit Cards for People with Bad Credit?

Bad credit credit cards are designed for individuals with poor credit scores or no credit history. These credit cards can help individuals rebuild their credit by making timely payments and showing responsible credit behavior. In this article, we will explore the features and benefits of bad credit credit cards, as well as the considerations to keep in mind when choosing the right one for you.

Types of Bad Credit Credit Cards

There are 2 types of bad credit credit card you can apply for.

  • Secured Credit Cards: Secured credit cards require a security deposit to be put down in order to obtain a line of credit. The security deposit acts as collateral for the credit card issuer, making these cards easier to obtain for those with bad credit.
  • Unsecured Credit Cards: Unsecured credit cards do not require a security deposit but may have higher fees and interest rates. These cards may be more difficult to obtain for those with bad credit.

Benefits of Bad Credit Credit Cards

There are a number of benefits you can enjoy with a bad credit credit card.

  • Credit Building: One of the biggest benefits of using a bad credit credit card is that it can help rebuild your credit. By making timely payments, keeping balances low, and using the card responsibly, you can improve your credit score over time.
  • Access to Credit: Bad credit credit cards provide access to credit for those who may not be approved for traditional credit cards. This can be helpful for individuals who need to make purchases or pay bills but do not have the funds upfront.
  • Rewards: Some bad credit credit cards offer rewards programs, allowing you to earn points or cash back on purchases. While the rewards may not be as generous as those offered by traditional credit cards, they can still provide some value.
  • Credit Education: Many bad credit credit cards offer resources and tools to help cardholders learn about credit and how to improve their credit score. This can be especially helpful for individuals who are new to credit or are trying to rebuild their credit.

Considerations When Choosing a Bad Credit Credit Card

There are a number of factors you should consider when choosing a bad credit credit card.

  • Fees: Consider the fees associated with the card, including annual fees, late payment fees, and foreign transaction fees. Make sure that the fees are reasonable and that you can afford to pay them.
  • Interest Rates: Look at the interest rates associated with the card and whether they are competitive. Make sure that you can afford to pay the balance off in full each month to avoid accruing interest charges.
  • Credit Limit: Consider the credit limit offered by the card and whether it aligns with your needs. Make sure that the credit limit is high enough to cover your expenses but not so high that you risk overspending.
  • Credit Building Potential: Look for cards that offer opportunities to build credit, such as reporting to the credit bureaus or increasing your credit limit over time.
  • Rewards Program: Consider whether the card offers a rewards program and whether it aligns with your spending habits. While rewards may not be the top priority when choosing a bad credit credit card, they can still provide some value.

Bad credit credit cards can be a helpful tool for individuals looking to rebuild their credit. When choosing a bad credit credit card, consider the fees, interest rates, credit limit, credit building potential, and rewards program. By choosing the right card and using it responsibly, you can improve your credit score and work towards better financial health.

Rebuilding Your Credit with Credit Cards

Sworn off credit cards due to irresponsible spending? Don't act too fast! You may be in denial if you think you can manage without a credit card. Access to a Visa or MasterCard is necessary for renting cars, shopping online and even holding reservations at certain restaurants. Thankfully, credit cards may have gotten you into debt but can also help get you out. Here's how to improve your credit score with credit cards:

  • The first step to improving your credit score is to understand how the three credit bureaus report your financial activity. Periodically, your credit card, mortgage, car loan, and other companies will report your good and bad credit activity - much like a report card. If payments are made late or you're over your line of credit you'll see a bad mark on your credit report. Negative activity will remain on your credit report for long periods of time and when other lenders check on your credit worthiness they are either less inclined to lend you money or will do so at a much higher cost.
  • Before you make that next purchase consider if it's a need or a want. Your credit score is impacted by how much credit you're currently utilizing. For example, if you have a $1000 credit limit it's more favorable to your credit score if you only utilize between 10% and 30% of that limit. Meaning, maintaining a balance of $300.00 or less will favorably impact your credit score.
  • You've heard this one over and over but it's still worthy of a reminder. Making on-time minimum credit card payments consistently has a significant impact on your credit score. Budget appropriately and pay your creditors before the due date each month.
  • Don't exceed your credit limit. Creditors are quick to report credit limit issues to the credit agencies and this will instantly stand out. Utilizing only a portion of your available credit is most favorable but not exceeding your credit limit is a no-no. In fact, paying off your credit card each month will help you best budget your money and demonstrate responsible spending to creditors.
  • If you're credit cards have been closed, due to irresponsible spending, apply for a secured credit card. These cards typically allow for you to gain access to a Visa or MasterCard with your collateral deposit. Often after 6 to 12 months of responsible spending companies will upgrade the card to a more traditional line of credit. Gaining access to credit again, and using it responsibly, will positively impact your credit score.
  • Once you've improved your credit score you should upgrade to a better credit card with fewer fees and a lower interest rate. This will continue to benefit you financially which will be reflected within your credit score.

Responsible credit card spending is the key to improving your credit score. Make payments on time, mind your spending limits and even apply for a secured card if needed to get your credit score headed in an upward direction.

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