Individuals who are irregular with their debt payments are afflicted with an impaired or a bad credit rating. For such individuals, it becomes difficult to get approval for financial products and new credit, including standard credit cards. Nonetheless, they can opt for alternative credit cards for bad credit.
Credit Cards for Bad Credit: Options
An individual having bad credit can get the following credit cards:
- Prepaid credit cards: These can be obtained very easily, regardless of the credit situation. However, they do not provide any extension of credit by the issuer. An individual has to deposit money in an account, similar to a checking account, which becomes the spending limit. Unlike a checking account, a prepaid credit card facilitates online purchases.
- Secured or bad credit credit cards: For obtaining this, one has to deposit some amount in an interest-bearing savings account, which becomes the collateral. A credit card and a relevant line of credit are issued with respect to the amount deposited. Secured cards function exactly like standard credit cards, having wider acceptance than prepaid cards. Moreover, secured cards are generally reported to the credit bureaus. Hence, it can help to reestablish creditworthiness by making timely payments. Additionally, timely payments may lead to higher credit limits without any further deposits.
- Unsecured credit cards: This is a standard charge card, which does not require any deposit or collateral. However, since it takes an individual’s credit score into consideration, it can not be easily acquired by a person with a bad credit. Individuals having bad credit are offered unsecured credit cards on stricter terms, such as low credit limits, high interest rates and/or fees. Nonetheless, making timely payments on unsecured credit cards helps to significantly improve creditworthiness of an individual.
In a bad credit situation, individuals are quick to resort to acquiring bad credit-credit cards or high interest credit cards. However, before venturing into a new source of credit, one must assess the situation thoroughly and determine whether s/he will be able to manage the additional credit burden. In some cases, it is advisable to manage existing debt before applying for new financial products. A long term debt management solution or a balance transfer deal may be a more appropriate alternative in tough scenarios.