Getting Credit Cards With Bad Credit Is Possible With
Compromises
Modern life
dictates that a credit card is an important tool, as much as a source of credit
finance. After all, how else can we book a hotel, buy an airplane ticket or do
any of our online shopping? But it can be very difficult to get credit cards
with bad credit, and not impossible.
The fact is
that, with the weight of low credit scores, it is only to be expected that card
issuers will hesitate to approve a credit card. Often, the first casualty to
borrowers with poor scores is the credit card, with that bill usually left
until last to be paid. Granting fast card approval is likely when the applicant
has an excellent record of paying their credit card bills.
However, a fast
rejection is likely if such a record is poor. Those that are willing to take
the risk and approve the application, usually insist on a number of conditions.
This is where compromises need to be made, though there are always credit card
options to choose from.
Interest, Fees
and Charges
When applying
for credit cards with bad credit, the most likely compromises to accepted are
an increase in interest rates, fees and other charges, as well as the absence
of some commonly introductory incentives.
The chances of
fast card approval are practically nil, but if the card issuer assesses that
the risk is worth it, then they will try to cover that risk with a higher
repayment rate. This can mean interest as high as 25% might be charged on the
credit balance, compared to the normal 11%-14%. So, when $1,000 is spent, then
a repayment of $1,250 has to be made.
It is also
likely that a high annual fee will be charged, and that the normal 0% APR
introductory offer is dropped. If the credit score is not too low (600 - 650),
then the issuer may only reduce such incentives to shorter period of time -
like 3 months instead of 6. But there are still credit card options.
Lower Credit
Limits
Arguably the
most significant restriction relates to the credit limit that is granted.
Issuers know that mistakes of the past do not mean mistakes in the future, so
they are willing to grant credit cards with bad credit. However, the credit
available is very small, between $500 and $1,500.
This may seem
pointless to have, but it does give a chance to the cardholder to develop a
positive track record over time. Most issuers who grant such limited credit
balances are willing to review the limit after a stated period of time -
perhaps doubling the limit after 12 months. And as the trust level improves,
such benefits as fast card approval are also restored.
What this
means, of course, is that credit card options increase as a firm record in bill
payment is developed. If nothing else, it makes accepting the compromises well
worth the effort.
Avoiding the
Extra Fees
The higher fees
and lack of incentives might seem unfair, but it is worth taking into account
that controlling ones own spending habits is the best way forward anyway. The
problem with seeking credit cards with bad credit is that the chances of
repayment are considered low too. But by controlling spending closely, and
making payments consistently on time, issuers have a firm idea of how real that
risk is.
Though fast
card approval is an attractive feature, more important is rebuilding a credit
rating that will see interest rates lowered again, and such incentives as bonus
points and 0% APR for the first 6 months returned. Biting the bullet to achieve
this is something that has to be done.
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