Restoring Bad Credit With A Credit Card

By Author: Todd Holliday
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If you have less than perfect credit, you may find it difficult to obtain a standard credit card. However, certain issuers have designed credit cards specifically for people with bad credit. These cards, also known as bad credit credit cards, often have higher interest rates and lower balances. Some interest rates can be as high as 19%. Still, if used wisely, these cards can help you in limited or emergency situations and, at the same time, restore your credit. If you choose to get a bad credit credit card, search for one that meets your particular financial needs. Find a card that reports your activities to all of the major credit reporting agencies. Make sure you understand all of the terms or conditions to avoid additional credit pitfalls. More importantly, do not abuse your card or you will find yourself with a worse credit problem.

There are basically three major types of cards for people with bad credit: unsecured, secured and prepaid. Each one has its own financial advantages and disadvantages depending on your situation. Below is a brief summary of each card:

Unsecured Cards. Unsecured cards rebuild your ...
... credit faster since most issuers report your monthly activities to the three major rating bureaus. However, these cards typically have very high initial fees and small credit limits. If you use the card prudently and pay your bills on time, your credit limit will rise over time. If you need to repair your credit, an unsecured card may be just the tool to achieve your goal - that is, if you pay your monthly balance in full and on time. Fees vary greatly depending on the particular card issuer, so shop around for a card with a lower fee to save money.

Secured Cards. Secured cards can also help you rebuild your credit rating. They are very popular as acceptance is much easier and they often have lower fees. Unlike unsecured cards, you have to secure this type of credit by paying a deposit to the card issuer; a minimum deposit is usually around $200 or $300. Premium secured cards usually require no account opening fees and have low annual fees that are typically around $50.

Prepaid Cards. As the name implies, prepaid cards are cards where money is paid in. These cards do not offer a line of credit but rather store the prepaid amount for later expenditures. Prepaid cards can be used similarly to regular credit cards and may even carry the MasterCard and Visa brand names. However, fees are higher than those offered by secured cards, so search for ones with low monthly fees.

For car owners with bad credit, it is still possible to get gas cards to keep their vehicles refueled. However because of escalating gas prices, these cards have more restrictions. They have higher interest rates and the application process is harder than before. Your best bet is to consider a secured gas card that allows you to pay at the pump. Some of these cards even offer rewards similar to unsecured gas cards. Additionally, secured gas cards offer the advantage of rebuilding your credit.

Remember that repairing your credit is a time-consuming process. You cannot undo a bad credit history overnight, or even over a matter of months. It is important to find the right card that will help you repair your credit and at the same time provide you the convenience of a regular credit card. Shop around for the lowest monthly fees and APR on purchases. Pay your monthly balances in full and on time. If you follow these basic steps, you will ensure that your credit score will eventually improve over time.
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