Credit Cards For Bad Credit - What Are My Options?
By Ken S

What is bad credit? Well, there are many factors that can cause someone to have bad credit. If you have been over 30 days late on loan, credit card, or mortgage payments, if you have unpaid medical bills, or if you have legal judgments against you such as child support or other lawsuits, you may have "bad credit". There are many of us who have been unable to keep up with our monthly bills and have fallen from having good credit to having bad credit in the last 12-24 months.

You may be thinking there are no credit card options for someone with bad credit. That is not true. Access to a credit card is almost required in this technology-based age we live in. This increasing need for consumers to make credit card purchases creates the demand for more and more credit cards for bad credit.

There are three types of credit cards that are available for people with bad credit. The first type is called a prepaid credit card. With a prepaid card, you get out of it exactly what you put in. Similar to a checking account, you deposit a certain amount of money into an account and this is your spending limit. When your prepaid credit card balance reaches $0, you can "recharge" it by depositing more money into your account. Prepaid credit cards are great for budgeting, online purchases, and those that cannot obtain a conventional checking account. Approval is usually guaranteed regardless of your credit score and there is no need to deal with the credit bureaus.

The second type of card you can obtain is a secured credit card. With a secured card, you deposit a cash amount into an interest-bearing savings account. This amount becomes your collateral. You are then issued a credit card and a line of credit in the amount of your deposit. When you make purchases, your credit limit decreases, monthly payments are calculated, and you are sent a bill. If you make purchases, a monthly payment is expected just like a regular credit card. Secured cards are great because they function like regular credit cards allowing you to book travel arrangements such as hotels and rental cars that do not accept prepaid cards or debit cards. Like prepaid cards, approval is usually guaranteed regardless of your credit score. Unlike prepaid cards, many secured card issuers report payments to credit bureaus. This can be a great way to establish or re-establish your creditworthiness by showing timely payments. After several consecutive timely payments, many secured card issuers will increase your credit limit without requiring an additional deposit.

The third option is an unsecured credit card. This is a regular credit card that does not require a deposit, and your credit score is taken into consideration. If you have bad credit, the limit on an unsecured credit card may be lower than a person with good credit, and you may be subject to slightly higher interest rates and/or fees, but the advantage is that you will not have to make any kind of deposit up front. Many unsecured credit cards for bad credit come with credit limits up to $1000. Making small purchases and timely monthly payments can help you re-establish creditworthiness as most unsecured credit card issuers report your payments to the credit bureaus.

Whether you apply for credit cards for bad credit, or any kind of credit cards at all, making timely payments is a sure way to prove creditworthiness. And if your credit is bad, you should also think about credit repair. You may be able to qualify for a higher credit limit or lower interest rate in just a few months.

-Ken S.

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