Once your credit reputation is blemished you will find it almost impossible to obtain an unsecured credit card from a reputable lender. In the wake of so many defaults lenders have tightened up their lending criteria and are less willing to expose themselves to risky customers. Ironically though if you do have bad credit one of the best methods of improving your Fico score is to use a credit card. Not quite the catch 22 situation it appears as credit cards are available for those with bad credit.
You only need to look online to see the hundreds of advertisements offering credit cards for those with bad credit. These should be avoided at all costs as they are issued by sub prime lenders who charge hefty fees and interest rates. First Premier bank specializes in credit cards for bad credit and currently has an interest rate of 59.99%. Unless the balance is cleared in full each month the interest rate will be charged, but as fees eat into the availabe credit before the card is even used many users become trapped and unalbe to clear the full balance. Howver those with good discipline who avoid First Premier products can make use of other sub prime lenders whose fees are lower and clear the balance in full.
It is far more sensible to acquire a secured credit card from a reputable lender and use it wisely to rebuild your credit score. If your intended use of credit is just to spend even more despite your credit history then secured cards are not for you, but sub prime lenders will be your friend.
Secured credit cards are ideal tools for those who are concerned to rebuild their credit history. One needs to be disciplined with their use or it defeats the object of carrying one. If you are obtaining credit as a means of rebuilding your reputation then you should pay the full balance off every month and thus not incur interest charges or leave yourself open to late payments; after all if you have bad credit you will have been down that route before. Only use 30% of the available credit line to demonstrate you can keep to the recommended use of credit to debt ratio.
If you want a secured credit card then you will need to pay a deposit equal to the line of credit extended. This is a good practice as it will encourage you to save. Many lenders will place your deposit in an interest bearing savings account until you are in a position to move onto unsecured credit. Secured credit cards come with a price as they carry fees. However not all fees are equal and you should check the terms carefully as some advertise as having no annual fee but then levy a processing fee. At this time the Capital One credit card carries the lowest fee at just $24.
The interest rate should really be immaterial to you as one of the things you must learn to improve your credit is to pay the full balance each month. If you are able to do so then interest rates mean nothing and establishing this practice with a secured card will stand you in good stead later. If you use the card wisely you should be in a position to move onto unsecured credit again in about one year. Do ensure that the secured card you use does in fact report to each of the three main credit agencies so that your cautious use of credit is recorded.
Another option of credit available to you is store cards as they usually accept almost anyone. However the drawback is they can only usually be used in house and they do not have as much clout on your credit report as a secured card from a reputable lender. Pre paid credit cards are not in fact credit cards but cash loaded cards and are an expensive way of using plastic. Essentially you are paying to use your own cash and paying for the privelege even though you are not actually borrowing money. A rather clever con unless given to teenagers by responsible parents.
In summation secured credit cards from reputable lenders with low fees are the best way to obtain credit when you have bad credit. Steer clear of sub prime lenders and use your credit card to re-establish your all important credit score.