Why Unsecured Credit Cards for People with Bad Credit Are Available

Oct 15
08:18

2012

Devora Witts

Devora Witts

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Many may wonder why unsecured credit cards for people with bad credit exist at all. Surely, the first casualty to bad credit is a credit card. But there is method to the madness.

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If credit cards are the bane of the consumer,Why Unsecured Credit Cards for People with Bad Credit Are Available Articles and failure to repay the bane of credit card companies, why are unsecured credit cards for people with bad creditavailable? Well, the fact is that falling into debt is not the fault of the card company, and with a mature and cautious approach towards spending,a credit card is still a wise investment.Basically, there are advantages to issuing credit cards to bad credit applicants, while getting credit card approval provides a chance for cardholders to redeem their credit status.Still, there are compromises to accept, including higher interest rates and extra charges. These make unsecured credit cards more expensive, but it also means that those with bad credit scores have an opportunity to improve their financial futures.Negatives to ConsiderUnfortunately, there is a price to pay for not keeping finances in order. When credit histories are not so good, lenders will almost always charge higher rates of interest and set lower credit limits. So, when it comes to providing unsecured credit cards for people with bad credit there can be little surprise that card issuers will charge high rates.Usually, there are also extra charges applied too, so the cost of getting credit card approval when a credit score is very low can be quite high. These charges can be manifest in the withdrawal of the 0% APR introductory offer that is typically used to entice new cardholders to use the card. Also an annual card fee will apply, which might otherwise have been dropped, and some of the purchase benefits are also taken away.The interest rate charged can be as high as 20%, which is as much as 7% higher than many typical card charges. What this means is that unsecured credit cards can be extremely expensive - at least initially.The Prepaid OptionThere are ways around the problem of high interest. When seeking an unsecured credit card for people with bad credit there are strict credit limits available, sometimes as low as $1,000. This is just about enough to pay a few bills every month, but on the bright side it means that the costs are kept to a minimum.One option is to choose prepaid credit cards, which are much easier to get approval on. It is not strictly an unsecured card, since the limit is only increased by the addition of a lump sum, thereby pre-paying the cost in the first place. It is more like getting approval on a debit card than getting credit card approval.To get the green light on unsecured credit cards, it is necessary to search far and wide on the Internet. This is where better terms can be found, since the credit card industry is so competitive. And remember, do not choose the first good deal that pops up - take time to compare.Improving TermsStill, high interest will have to be paid, and fees too. So, what good do unsecured credit cards for people with bad credit actually have? Well, it provides an opportunity to restore a strong credit status. If a cautious attitude is applied, and the costs are not high. And if payments are made on time, then late fees are avoided.This effectively means that getting credit card approval can lead to credit redemption. What is more, it increases the credit score, thus making general loan applications more likely to be accepted, and with better terms. In that respect, getting unsecured credit cards, even those with low credit limits, and taking a disciplined approach to using them, are worth the effort.