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Credit Cards With Bad Credit

When the individual is unable to procure a credit card because of no or bad credit history, a secured credit card may be a viable alternative.

A secured credit card looks and acts exactly like any other credit card except that it is backed up or "secured" by the card holders savings account. For example, a consumer opens a savings account with $300. The bank will then issue a secured credit card with a limit of $300. If you later wish a higher limit, simply request an increase of the bank and add funds to your savings. The net result is that the cardholder borrows from themselves with the convenience of a credit card at their disposal.

Besides the normal benefits of having a credit card, an even greater good is that the user can build or rebuild credit history. Credit history is 35% of the individual's credit score and a credit score is the determining factor of granting any type of credit. In other words, a good history of on time payment accounts for over one third of the decision to extend credit. This is perfect for the young person with no credit history or those just recently declaring bankruptcy. If the card is used and paid for, used and paid for, etc. on time payment history is developed and in time a normal unsecured credit card can be gained. Some financial institutions even offer an automatic conversion to an unsecured card after a period of time. The consumer should ask about this option at the time of application. . .

On the other hand of course, late payments will be taken out of your savings account with any associated penalty fees. But more than that, your credit history is again blemished and will remain on your credit report as a negative entry for 7.5 years. The worst part of this negative entry is that the individual's credit report is viewed by any and all financial institutions granting credit, many employers as well as most insurance companies. Late payments may even jeopardize the consumer's secured credit card with the possibility of having the card rescinded and never reissued. Therefore on time payment is essential!

Not all banking institutions offer a secured credit card. My recommendation is to approach a credit union or a larger bank. There is a list of financial agencies offering secured credit cards for $4 from:

Secured Card List BHA Customer Service 524 Branch Dr, Salem, Va. 24153

When selecting either a secured or unsecured credit card, be aware that you should not be paying excessive administrative fees, insurance fees or even high interest rates. Beware of secured credit offers over the phone or requests to call a 900 number.. Also "credit repair" clinics offering credit cards should be closely scrutinized. Report suspected fraud to the National Fraud Information Center (NFIC). 800-876-7060 9 AM to 5:30 PM EST Monday through Friday.

Learn more about this author, Michael Killian.
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