Bad Credit Credit Cards
If you are having difficulty obtaining a credit card due to a poor credit history, or even very bad credit, there are still a variety of options on offer. Many companies specialise in credit cards for people in this situation.
Although the interest payable on these may be higher than with other credit cards, once you have been successfully accepted for a credit card, it could help you to rebuild your credit rating so that you can obtain credit more easily in the future.
Initially you may be given a low credit limit, but if you consistently make the required repayments on time, your credit limit will gradually be increased.
As well as higher interest credit cards there are a variety of other cards available to people with bad credit history, as follows:
Secured credit cards
To take out a secured credit card you will need to make a deposit payment. This is to protect the credit card company if you default on your payments. It is important to remember that the deposit payment cannot be used in lieu of a monthly payment, and you will still have to maintain regular monthly payments at the required amount.
- Positives: the same as for high-interest, low-limit credit cards. Bad credit history can also be dispelled as you can rebuild your credit rating with a real credit card that offers classic credit-card convenience.
- Negatives: the same as for high-interest, low-limit credit cards, plus the security deposit. You have to remember that the deposit is just a deposit, not an advance payment. If you miss a payment, the consequences are the same as with any other card. In addition, you need to have the money for the security deposit to apply for a secured credit card in the first place.
Credit cards with guarantor
Some companies may ask for a guarantor when you apply for a credit card if you have a poor credit rating or no credit rating, for example, if you haven't previously applied for credit. The guarantor will usually be someone who has an above average credit rating. However, two important factors to consider are:
- If you default on your credit card payments, the guarantor's credit rating could be affected as well as your own.
- The guarantor may be asked to repay the debt if you are unable to meet monthly payments.
Department store credit cards
Department store groups issue this type of card to be used when making purchases at certain specified stores. Interest rates are usually high on store cards, but they can be easier to obtain than lower interest rate credit cards. Stores often give discounts to their cardholders or operate a points system, whereby the cardholder can exchange the points for discounts against future purchases.
With a charge card you have to make payment in full each time you receive an account statement. However, companies offer reward systems with this type of card, such as discounts, cash back schemes, reward points and free services.