When you have bad credit, credit card offers that arrive with the postal mail may appear to offer a solution to your credit needs. You may think credit is credit and apply for various mailed offerings that claim you have been pre-approved.
We’ve all noticed shoppers in the checkout line at a store who unfold a wallet filled to the brim with credit cards and carefully select one to use.
This may be a consumer with good financial resources but may be someone who is using credit to a limit that may cause damage to their all important credit rating.
Collecting credit cards was a status symbol in years past. Many of us had good credit and were happy to add another gold card or platinum card to our collection of plastic wonders.
Another Source of Income for Lenders
In the quest for every increasing profit, credit card lenders eventually exhausted the supply of consumers with great credit. If you had a credit card with every major lender you had stopped applying for more as you didn’t need them.
To keep profit rising, lenders had to find a way to offer credit to those with good, but not great, credit. The answer was to add some fees and charge high interest rates to balance the increased financial risk of granting credit lines to those not as well qualified financially.
Gradually, some of the terms of these accounts became predatory in nature. Even the most respected large financial institutions carried some accounts with predatory terms.
The result was an avalanche of growing consumer complaints about predatory credit card companies that resulted in new laws to regulate credit practices and protect the public.
Terms to Watch For
Over limit fees have perhaps generated more complaints than any other bad credit card practice. In the past, a spending limit was a limit you could not exceed. If you had $100 of available credit on your card your purchase of a $110 item would be denied.
That is not true for many people today. If you have $100 available and try to charge a $110 item there is a good chance the charge will be approved with no problem. However, you may find a $39 over limit fee added to your account on your next bill.
There may be times when you must incur an over limit fee but the problem with it may become larger if the lender does not correctly bill you after you have exceeded your spending limit.
If the over limit amount is added to your balance and you pay the minimum due it may not be enough to reduce your debt below the account limit and you may be charged a second over limit fee the next month. Can you imagine paying two $39 fees just for charging $10 over your credit spending limit?
The best credit card lenders might charge a hefty fee if you go over your credit limit but will add that overage and the fee to the minimum payment for the next month. It will mean a high payment for you for one month but will not add more fees to your debt.
Credit card offers for consumers with bad credit can be identified by the fees they charge and by their service to their customers. It is no longer a safe practice to apply for any credit account you are offered by mail.
Instead, you should carefully read all of the terms and conditions listed on the credit application to find a credit account that will help you financially rather than have the potential to harm your credit rating should you make the slightest error.
Under the law, you have the option of telling your credit issuer you do not want to go over your spending limit. It may result in embarrassment if a purchase is declined but is a good choice if you do not carefully monitor your account balances.
For those with bad credit, credit card offers can be a great help in correcting their credit rating but only if they carefully adhere to the terms of the credit account.