A few years ago, people having poor or no credit had their hands tied when it came to accessing credit cards. Trying to seek the services from a financial institution such as a bank was always futile. However, this has been changing overtime. As a matter of fact, people with very low scores or those who haven’t built any credit can access credit cards. Nonetheless, before approaching a provider, you should be aware of the following facts:
Higher Interest Rates
While or before applying for your credit card, you should be aware that the financial institution will charge you rates that are much higher than the market. This is a precautionary step just in case you default. A low credit score makes you appear like a risk to them. The high interests will apply when you make purchases as well as cash advances. Shopping around for the best rates is always advised.
Low Credit Limits
Usually, the normal credit cards come with a good line limit. This is usually based on source of income and credit score. In fact, due to the competition in the market, the providers are always willing to increase the limits just to suit you. Unfortunately, such options are not available for people with poor or no credit. As a matter of fact, you are more likely to be offered a very low credit limit.
Of late, the competition amongst credit card providers has increased. They will constantly advertise their services just to get that extra customer. They will use several incentives to attract a potential client. The most common are: airline/ frequent flyer miles, cash back, shopping rewards, hotel rewards, gifts and much more. Unfortunately such perks may not feature in the credit cards for people with bad credit.
Besides the low credit limits and higher rates of interests, credit cards for people with no credit or poor credit may also attract other charges. They apply the charges to minimize the risk or liability of offering you the service. Common charges include application fee, annual fee, monthly fee and more. Since the extra charges are not standard, you may be lucky to come across a credit card that only has minimal fees.
Credit cards come as unsecured or secured. Unsecured do not require you depositing any money. Secured credit cards require a prospective borrower to deposit an amount of money as security. The credit line will be based on the value deposited. The credit card will operate like the normal debit card. A borrower is therefore not allowed to go beyond the deposited amount.
Credit cards for people with no credit or bad credit brought relief for many people. Finally, they could access credit and make purchases even when they were in the “red.” This ensured they could live a more comfortable life. However, the credit card should be used in building or re-building the credit score rather than splashing money around. A good plan is to make timely payments and ensuring you do not exceed 30% of the limit.