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Bad Credit Cards
If you are facing credit problems, logically looking for new credit cards is counterintuitive. However you can find some options that may actually help you with your credit crunch- but like all things that sound too good to be true, you need to proceed cautiously to mitigate any further damage you could do to your credit.
The average American household carries around $8,000 in credit card debt. If minimum payments are starting to stretch your money past the point of affordability, this should be sign that you need to break the credit habit. Repairing the damage you have done to your credit score- which may not seem important at the moment but will matter greatly the next time you want to take out a loan for a car or a house- can start by consolidating your debt.
You’ll likely come across “Balance Transfer” offers when you search for “Bad Credit” cards. The offer is to take all your debt from the old cards and transfer it to the new card for a relatively lower interest rate. Two things to consider before taking this type of offer: the first is how long is the low interest rate fixed for (usually for a fixed period of time) and what is the interest rate for new purchases- this is often much steeper.
Another option you’ll find is a “Secured” credit card. This means the line of credit you are given is equal to an asset you own, usually a banking product like a CD. If you are in the position where this is the only credit offer you can find, be very careful. Exposing your limited positive resources to real risk is not prudent financial thinking. Whatever it is that you would purchase with that credit card, you would be better off using the cash of the CD and making the purchase outright. At least you wouldn’t be charged an annual fee or interest.
If your credit history is really damaged you may find your only alternative is a prepaid credit card. If irresponsible credit card use has led you here, this may be the best option. These cards require you to deposit money on them before making the purchase. Granted, if you are in a credit crunch having cash on hand to prepay is difficult but at least you won’t be spending beyond what you have. Since the digital marketplace is ever-expanding simply quitting credit cards cold turkey is getting more and more difficult.
The last thing to consider when pursuing a “Bad Credit” card is something called “Universal Default.” This is a provision most credit card providers make in your credit agreement. What this means is that if you default to any of your creditors, the credit card company reserves the right to change your interest rates- no matter what they have promised you. In other words, if you miss a car payment or are late paying your monthly cell phone bill you have actually defaulted and even if the charge wasn’t on your card, they can change your rate. It doesn’t happen all the time but it can and you should be aware of the risks. One thing you can count on is that credit card companies ALWAYS make their money.
Topics: Credit Cards, Debt Consolidation |
