Before you submit a credit card application you should carefully compare the options available.
Not too many years ago there were major lenders taking applications from those with bad credit. It was easy to find a credit card that would be secured with a cash deposit into a savings account.
Unfortunately, it can be difficult today to find a standard credit card for bad credit. The major credit lenders have discontinued their offers even though consumers using those cards had a low default rate.
The secured accounts are not high earning accounts for lenders and the lack of high profit is the reason so many offers were withdrawn. There are still a few banks that offer secured credit cards for consumers with damaged credit files.
The number of people who need a path to repairing their credit has grown exponentially in this current economic crisis. This may lead to creative solutions in time as lenders try to tap the huge market of buyers who are not using credit for purchases but it may be years before those solutions are available to the public.
A few lenders do offer secure card accounts for those with bad credit but the low number of possibilities means you must choose carefully!
Your first option should be your own local bank or credit union. If you previously had an unblemished credit file and have been challenged by a crisis such as medical emergency or job loss theres a good chance you can obtain a secured card locally.
Traditional larger banks have moved away from offering such credit cards but some regional banks have specialized in the secured account arena. Some secured accounts have reasonable fees and good customer service while others carry exorbitant and sometimes hidden fees that take advantage of consumers.
Secured credit cards are useful for those who have not yet established credit in their own name. This may be due to youth or to divorce where all of the accounts were in the name of the spouse during the marriage.
Fees and Terms
Even the best credit card for bad credit will carry an annual fee as that is standard for secured credit accounts. It is the other fees that need to be carefully considered as those vary widely.
Read the fine print carefully as some predatory lenders can add charges that may consumer your entire credit limit on the new card.
The amount you deposit to obtain the best credit card for bad credit will vary from $300-$500 and the credit limit on the account will be either that deposited amount or, more likely, a percentage of the deposit.
If you open an account with a deposit of $300, your credit limit may be only $200 on that card. The lender will add the first annual fee and any other fees to the account.
For example, if there is an annual fee of $80 and a set up fee of $75, you will have a debt on your new card of $155 before you make your first purchase.
Before submitting your application, carefully read the fine print and compare the terms and fees of various secured credit cards offered. Fees are unavoidable for these accounts and all will carry an annual fee.
Initiation or startup fees are also common but avoid any applications that require a monthly payment for insurance or high fees for each account transaction.
The banks offering secured credit card accounts today are not the major banks with names you are familiar with. Some issuers are Orchard Bank, Centennial, First Premier and Applied Bank.
Due diligence in comparing terms and fees will pay off and its also wise to search online for consumer comments about the lender you are considering.
Once you have chosen the lender to use, submit your application to only one of the banks. Almost anyone can quality for a secured card and multiple applications are not necessary.