Credit cards have become a way of life and a necessity in today’s fast moving world. Many people use several different credit cards issued by different agencies and retailers to manage their various financial needs apart from obtaining loans and other types of credits through various other means. However, in some instances one may not be able to fulfill all their financial obligations, which could lead to the person being branded as having ‘bad credit’.
Having bad credit will lessen the persons ‘credit worthiness’ and will also make it difficult for them to acquire any type of future credit. However, they can still obtain a credit card that is specially designed for those with bad credit, which also allows the consumers to build again their credit worthiness.
When talking about credit cards designed for persons with bad credit, there are two main types. These are the secured and unsecured credit cards.
Secured credit cards
In order to issue a secured credit card, the issuing agency would request the consumer to make a deposit in the range of the maximum credit limit of the card. Thus, if the consumer makes a $1000 deposit, the maximum credit limit would be the same or a percentage of the deposit. However, the lending agency will only liquidate the deposit in the event of a default and the credit card will function as usually with consumer receiving monthly bills with added interest and other charges. If the consumer pays the bills and interest on time, it will help building his or her credit rating and therefore gradually ease the bad credit with time.
Unsecured credit cards
As the name suggest, unsecured credit cards do not require a security deposit but will burden the consumer with a higher interest rate, higher annual fee, substantially high initiation fee, as well as relatively high financial charges. At the same time, the credit limit of these cards will be extremely low at the beginning but the consumer can build his or her credit worthiness and substantially increase the credit limit with time.
However, in certain instances, persons with bad credit may also be able to secure a regular credit card with few additional procedures. These include having a person with a ‘good credit’ rating to co-sign a credit card, or else to opt for minor credit cards issued by various retailers until one builds reasonably strong credit worthiness.
Thus, having bad credit does not necessarily mean a person cannot obtain a credit card, but having secured a credit card, one needs to meet up with his or her financial obligations in order to prevent ‘bad credit’ from becoming worse, and build up on one’s own credit worthiness.