Bad credit can damage credit card applications. But applicants with financial problems will be pleased to know unsecured credit cards for bad credit borrowers are available, although proper card management is a must.
Bad credit ratings are no friend to loan applicants, but they are equally damaging to the chances of securing credit card approval. But that is not to say bad credit borrowers have no credit card options open to them. In fact, there are unsecured credit cards for bad credit borrowers, and tailored to suit their needs.
Remember that card issuers would prefer to approve an application than reject it, since only issued cards can lead to profits. But it is also true that they have policies that are strictly adhered to. So, getting approval despite bad credit requires some planning and effort, and come at the cost of compromises like high interest rates, for example.
Before ever seeking a credit card, it is important to understand exactly where the costs lie and how expensive the card might prove to be. After all, it is the costs associated with an unsecured credit card that makes it potentially so expensive.
Unsecured Cards Explained
Actually, it is this kind of credit card that we are more familiar with, and for that reason they are not difficult to explain. Because these cards are unsecured, issuers accept the main share of the risk involved, and when they approve unsecured credit cards for bad credit applicants, the risk is perceived to be even greater.
The consequence for the cardholder is that a higher interest rate is accepted, as well as a usually small credit limit. Normally, interest can range between 8.5% and 10.5%, depending on the card company, but when a company grants approval despite bad credit, the rate can be 13% to 19%. Credit limits can vary too, with $10,000 a generous limit.
What this means is that unsecured credit cards should not be used as freely as the cardholder might like if they are not to be too expensive. Careful management of the card is hugely important, with the long-term benefits making future applications easier.
Card Charges to Consider
The idea of unsecured credit cards for bad credit borrowers is a worthy one, with cardholders effectively being given a chance to improve their credit rating. But how the cardholder uses the card is the core reason for any future credit problems. Every time it is used, the charges incurred need to be considered.
It is not unusual for cardholders to make purchases but not fully repay the balance when the bill arrives. Between the interest rates and any late payment fees, the cost of the card can be extremely high. Securing approval despite bad credit provides a great opportunity, but it is always necessary to repay what is spent. This is where a budget becomes so useful.
So, with any unsecured credit card, be sure to read the small print to discover all of the relating charges and fees and remove the risk of surprise. Also, understand that in some cases, the excellent APR quoted can be permanently increased if repayments are late.
Avoiding High Card Costs
Keeping credit card costs down really depends on one thing, namely repaying the card balance on time. While getting unsecured credit cards for bad credit management purposes is a boost to any bad credit borrower, not paying the full balance promptly can see the break become a disaster.
Not everyone knows that the interest charged on purchases is only applicable at certain times, and if the balance is paid quickly the interest will be lower if not zero. If the balance is allowed to add up over the months, then the interest will build too and quickly the bill becomes another troublesome debt.
Also, be sure to stay within the credit limit. If the balance on a $10,000 credit limit reached $11,000, then the extra fees applied can create huge financial problems. Eventually, the simple task of repaying the unsecured credit card will become almost impossible.
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