Are you having a difficult time getting approved for a credit card? Due to the poor state of the economy many credit card companies are getting more selective with who they’ll issue cards to. Luckily many companies offer a solution for those interested in credit cards for bad credit. These types of cards are not for everyone and offer a few drawbacks in addition to the advantages. Here are a few pros and cons to help your in your decision to apply for secured credit cards for bad credit.
Advantages of getting a Secured Credit Card
- Instant Approval – Secured credit cards have an instant approval process so that you don’t have to wait days to be notified of your approval or disapproval as you would with an unsecured credit card. The secured credit card application normally only takes a few minutes and are usually offered by the major card companies.
- Credit Bureau Reporting – Most of the popular secured credit card companies report to the 3 major credit bureau’s. If you have poor or no credit then many times the only tool you’ll have to help you build up your credit will be a secured credit card with bad credit.
- Incentive Cards – Many times you can find incentive secured credit card plans such as airline miles and points. Be sure to research your card first to see if their plan will be an advantage to your lifestyle.
- No Debt Collectors – If for some reason you aren’t able to make a payment then your card issuer will simply take the money out of your deposit rather than sending debt collectors after you. Note that this is a very unwise move as the reason you got your secured credit card was to fix your credit history.
- Earn Interest – With many secured credit cards you can earn interest on your deposit. Granted you probably won’t amass a large fortune but every little bit can help with your savings
Disadvantages of a Secured Credit Card
- Required Deposit – In order to get approved for credit cards with bad credit you’ll need to put down a deposit which will act as your card maximum. The amount you deposit varies between each card and is normally 50% – 100% of your maximum. This may be difficult to come up with for the average applicant especially if you’re already in a bit of debt.
- Card Fees – Because you don’t have a credit history built up, the card issuer views you as a risk and usually charges a nominal application fee. This averages between $20 – $35 and you should always read the fine print of each card to determine if there are additional fees.
- High Interest Rates – High interest rates on secured credit cards is again because the card issuer views you as a risk. Rates can be as high as 30% so it’s very important to pay off your card every month and on time so you don’t occur massive interest. If you let your payments go too long you can actually incur penalties that are higher than your card maximum.
Should you look into Secured Credit Cards with Bad Credit?
If you use these types of cards strictly to rebuild your credit history, secured credit cards can be your number one tool as you begin your journey. Be sure to do your own research and find a card where you can handle the deposit amount and the monthly payments.
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