Credit – 1600 Articles
Credit – 1600 Articles
“Bad Credit” Cards: How You Can Avoid High Fees
Individuals with problematic 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. 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…
bad credit card, bankruptcy credit cards, poor credit credit cards, credit card fees
Individuals with problematic histories often suffer unfairly from high mortgage, insurance, and car loan rates. On top of that, they have difficulty getting approved for cards. The whole situation can get extremely frustrating. Frequently, I get emails from consumers wondering what they can do to rebuild. 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 by reporting to the major 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” cards bury in the fine print. Of the three major cards I will examine, only one stands out as consumer-friendly.
“Bad 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” Card #2: These card charges a very high interest rate for an unsecured 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 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” Card #3: This card is available as both a secured and unsecured card, based on the issuer’s review of your 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 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 card is $128, about half of what competing cards are charging.
Clearly, there are substantial difference between “bad” cards. Of the three offers we have examined, only one doesn’t take you to the cleaners. In fact, “bad credit” card #3 provides great value. All positive changes to your credit history and credit score will translate into lower loan rates, lower card interest rates, lower insurance rates, and ultimately, thousands of dollars in savings. The path to rebuilding has its costs, but in the long term, rebuilding 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.