While the idea of using a credit card when you have a history of bad credit can be frightening, it is hugely important to do so. The realization is that using credit cards, or more specifically, paying off your credit cards, is a way to build your credit. But the only way you can pay off a credit card is if you use it every month and eliminate the month’s balance without fail.
Certainly this is not an overnight process. It will take time and commitment to keep your spending at a responsible level that you are sure you can pay down each month. Also, applying for a new credit card with features that will work in your favor is a wise move. You may not be aware of it, but there are credit cards that are designed for those with bad credit.
Applying for a new credit card while you have bad credit does not come with guaranteed approval. You need to make sure you are doing what you can to get your credit on track when you apply. However, applying with bad credit also doesn’t mean an automatic rejection. But it is important you know what type of card to apply for.
According to The Simple Dollar, there are two types of credit cards for those with bad credit:
Secured credit cards: These are cards that require you to put down a cash deposit to borrow against. This type of card can keep you at a certain limit, which is set by you, but it also means you have to have the money up front, which can be problematic for many consumers looking for new means of credit.
Unsecured credit cards: While these cards still have spending limitations, they have no backing that you have to put down. If you are better at restricting yourself and know your limitations, then an unsecured card can give you a bit more freedom. However, since there is no backing, it is incredibly important to make sure your payments are made on time, as interest and penalty fees can be costly.
“Using the right credit card can help you build better credit.”
But these two types of credit cards can be applied in different ways by different banks or lending organizations. You should talk to several banks and do some research of your own on which bank and card is right for you. In the meantime, you have a few options to consider.
Popular cards for those with bad credit
There are many cards available and they offer a variety of benefits, such as low interest rates, no fees for balance transfers and a plethora of others. Currently, these are some of the top credit cards for those with bad credit of 2015:
Citi Simplicity: This card is a great resource to have, as noted by NerdWallet, because it has annual fees of $0, as well as no late fees or penalty APRs. Additionally, this card has a 0 percent APR rate for 21 months, which is the longest length for that rate of any card. This card also allows you to transfer your existing debts from other cards onto it for no penalty (in the first 21 months), which means you can settle your debts in one place and not have to worry about late fees or additional penalties. While you should be paying your bills on time anyway, it is nice to know there is a cushion for you to help along the way.
Aqua Advance: According to Money Savings Expert, the Aqua Advance card is a great card to have in your wallet. While it can be startling because the card comes with an unreasonably large APR financing rate (34.9 percent!), the rate goes down if you pay your bills on time, which you should be doing anyway. In this regard, these high potential costs shouldn’t matter if you don’t get carried away. But there are benefits associated with the card, such as low limits designed to keep your spending in check, and the fact that the card comes with an Amazon voucher as a two-month reward for keeping on track with your repayments.
Lake Michigan Credit Union Prime Link Platinum Visa: You don’t have to turn to banks to get a credit card either. The Lake Michigan Credit Union credit card is excellent because it allows you to repay a large amount of debt over a period of time, so you don’t feel stressed and in a rush to pay down everything you have in a hurry. While it starts with an APR rate of 6.25 percent, this rate stays the same throughout the duration. Additionally, there are $0 in annual fees associated with the card.
Having a credit card is important to build strong credit, and there are plenty of options out there for those who have poor credit they are dealing with. Do some research, find a rate and card that is appropriate for you and start rebuilding your credit today.