Credit Cards for the Under-credited

For those in debt, getting out of debt becomes a main priority.  Living with bad credit can truly limit the things you can do, especially when you don’t have a credit card.  It can be a nightmare just to make a reservation at a hotel or make payments online!  However, as in most cases, there are always options!  Secured and unsecured credit cards, department store credit cards, and prepaid credit cards are three options available for the indebt and under-credited!

Secured and unsecured credit cards are available at banks and online.  It is, of course, safer to get one at a bank but online offers can sometimes be much cheaper and less problematic.  The best part about these cards is that over time, they can help rebuild and maintain your credit, as long as you stay consistent with payments.  Banks will look at your payment and credit history to determine your eligibility.  You are also required to have a steady job, long-term residency in the U.S and somewhat low-debt ratio. Your credit limit will be determined based on your risk assessment.  This means that depending on your credit score and debt ratio, they will give you a credit limit that they know you will be able to handle.

There are two types of these credit cards available; unsecured and secured. An unsecured credit card does not require a deposit.  The bank or online company will determine your spending limit according to your qualifications. A secured credit card may be a safer and more effective approach for those in debt.  This card requires an initial deposit into your savings account that usually cannot exceed your credit limit by more than 25%.  The amount deposited will serve as your credit limit, so if you deposit $1000 you will have a spending limit of $1000.  If used appropriately, the deposit will earn interest like a regular savings account does and that means more money for you!  Accordingly, if there are any problems and you are not able to pay back a debt, your deposit will be used to cover the debt and your secured credit card will be taken away from you.  Also, the APR on these cards is usually about the same as regular credit cards. 

There is also the option of a department store credit card.  These are credit cards issued by successful chain companies such as Target or Macys.  Most people are able to get these credit cards because companies are desperate to hand them out.  Because the APR is so high on these cards (usually between 22 to 24%), you must make payments in full and on time every time.  After about a year, you should see a significant change in your credit score and you may be able to apply for a regular credit card.

Lastly, for those who do not qualify for the other two options, there are prepaid credit cards.  These cards are used primarily by individuals with too much debt and really bad credit.  Its convenience lies in the fact that credit is not needed to get one! In fact, there are no qualifications required!  Prepaid credit cards can be acquired online or at a bank.  All that is needed is your name and a $5 to $10 deposit!  You can deposit the money into the card and use it like cash.  This means that you can only use as much as you put into the card.  There are no interest fees, no late-fees and no paper work!  Although the card does not improve your credit considerably, it does make it possible for you to make payments and buy things online, make reservations and even rent a car!

When acquiring a credit card online, make sure the company is legitimate and safe.  Make sure you will be able to pay off your debt!  If used responsibly, these cards can help you get on the road to credit recovery!