The "Bad Credit Card" That May Do Good: Secured Cards
There are thousands of different credits cards in circulation. And millions of people the world over use them. Unfortunately, not everyone uses their credit card sensibly, though, as many of these same people find they have made expensive mistakes in how they handle their cards.
No doubt you can locate quite a few credit card users who are convinced that plastic money is dangerous. However most of these people have simply consistently overspent and ended in debt. Responsible use of a credit card, on the other hand, is very helpful in managing your finances throughout the month.
Credit cards are available not just for those who have a lot of money to spend. Some are developed specially for people facing challenging financial situations. These cards are known as “Bad Credit Cards.”
Bad credit cards are exactly that – credit cards that have a very low or very bad credit limit.
Credit cards are normally one of two types – secured or unsecured.
An unsecured credit card is not tied to the size of a person’s bank account. The limit put on the credit card is determined by the lending institution after some form of credit scoring. If the bank decides that the holder of the card should have a larger credit limit, depending on the result of the scoring, it will grant them one. Many banks then monitor the use of the credit card to adjust the credit limit higher or lower after several months. If the holder pays back the full balance on the card every month, there’s a good possibility that the credit limit will be increased.
If you secure an unsecured credit card, you must bear in mind that a high credit limit might not always match your ability to pay it back. So caution is the byword!
Unsecured credit cards are the most common type. They are normally the choice of credit cards for those who card shop. Unfortunately these cards can also “assist” people to spiral deeply into debt.
If your finances are not in good shape, you should resist the temptation to obtain an unsecured credit card since using them could make your problems worse if your spending isn’t tempered by self-control (and a budget).
Bad credit cards, on the other hand, are secured. Their spending limits are governed by the size of the balance available in a holder’s account. For instance, if a person has $1500 in their account, this is the amount of credit they will be permitted to use. If the balance ever goes down to zero, the owner will need to top up the account to continue using it.
Secured credit cards are sometimes referred to as pre-payment cards. This is because the credit limit is placed on the card by the holder. For a person who has been in debt previously, these cards are a very good, limiting alternative to no card at all.
Banks set these limits to prevent people from overspending. The credit card activity will also be watched to help prevent any future problems with uncontrolled spending. Using this type of card can eventually help repair your financial status.
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Help answer the question
I have roughly 5 -10k in bad credit card debt. I was wondering if I pay them off, will I get my cards back ?
Its been over a year since Ive been able to make any type of payment on them. Also, they all been turned into collection agencies. I know I will have to build up my credit again. I was just wondering if the cards I have will be turned back on again, or will I have to start fresh ? Also, lets say I was able to pay off all my bad debt tomorrow, will my credit report be cleared of all the bad things ?
bad credit cards
Tags: bad credit card, Credit Card, Debt, estate, loans, real, Refinance, secured credit card, unsecured credit card
This entry was posted on Wednesday, September 2nd, 2009 at 4:50 am and is filed under Credit Card. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
September 2nd, 2009 at 5:53 am
Creditors can either enlist collection agencies to recover debt on their behalf, or they can sell your debt to the collection agency. If it is the latter, then the account is closed. If it is the former, the account is probably "active", but there may be a block on it. For example, when I worked in the library, we used an outside collection agency to collect on library fines over $50. The library card is blocked. Only until they pay off their balance will we allow them to use the card again. (The books are assets of the City….a library card is like a credit card in which you're borrowing property.)
Your credit report will show that your collection accounts have been closed. They'll still show up on your credit report, so your credit will be ruined until you are able to repair it (through time and more responsible care of your credit).
Even if your accounts are still active, you will be paying high interest rates because you defaulted, which allows them to charge the regular rate. You might want to start anew, so that you have a better interest rate and your limit will be much lower, allowing you to maintain control of your credit.
September 2nd, 2009 at 6:25 am
Major credit card issuers like Discover, American Express and Chase offer a credit card for bad credit holders. A 'shopping' card offers you an unsecured line of credit from specific sellers. Use these cards to increase your credit rating, since the credit bureaus will be informed about your timely payments.
Take care to ensure your credit is good by making intelligent credit choices. Keep low balances, do not be extravagant and take care to pay off your balances promptly every month.
http://debt-trap.com/category/Bad-Credit-Credit-Cards.html
September 2nd, 2009 at 9:11 pm
Get one there : http://index-go.com/prepaid-credit-cards.asp
September 3rd, 2009 at 5:54 am
What about cards for people with an 800+ credit score?
Three things such people, who are just 13% of the population, want in a card:
1. Convenience. We use a card because it's easier than cash. Don't bother with a card that doesn't have a completely automated pay system. If the card only allows you to schedule a payment online manually, apply for a different card. You want a card that allows you to sign up once and have all future payments automated without your having to intervene manually.
Look for ease of tax accounting and business expense accounting. Find one that gives a periodic summary by purchase category and/or vendor, so that it's easy to use during tax or expense reimbursement time. Business cards are better at this than personal cards.
2. Protection. When inadequate service or defective product is purchased, it's easier to reverse payment from a credit card than from a debit card or other payment vehicle. You're also limited in the amount of theft or fraud that can be charged up.
3. Rewards: The best rewards for you are those that reward you for routine, necessary behavior. For many, that's for gasoline, grocery and utilities purchases. For others, it's travel purchases. The cost is that you have to pick the right specialty rewards card out of your wallet, or sign up the utility to be paid by credit card.
These incentives come at a risk: loss of privacy, and outright identity theft. Read your cards' Privacy Notices and act. Read your credit reports regularly. Each of the three major Credit Reporting Agencies (CRAs) offers you one free report per year. Savvy credit users will space out their requests: every 4 months, ask for a free credit report from a different CRA.
Why aren't they advertised?
Point 1: The most money is made off people who are lazy, complacent, ignorant or addicted. Thus, there is little incentive for credit card companies to advertise competitive products and services that reduce their revenue streams. Credit cards are demand inelastic: people will keep using them even as rates rise steeply. That is, it's tough to break a dependency on them. Why advertise much for something people already want?
Point 2: The treasures await you, but you MUST take action to get them. The users who are complainers or are assertive dealers get the very best deals: they've made the efforts that produce the best results. They use the phone to play off one card company against others until one of the companies budges. Because I never pay finance charges, I had to learn and practice this behavior before I could train others to do it. The companies have regular customer service reps as well as Customer Retention Departments, backup departments hired to keep you happy and loyal.
Point 3: If you've opted out of prescreened credit card offers (see opt-out link, below), you may not be receiving the offers. Or do you toss your junk mail without reading it?
Solutions:
1. Avail yourself. Try picking up the phone and in a pleasant, cheerful, polite tone, telling your creditor, "I'm thinking of closing my account unless you lower my rates and improve my rewards. What can you do for me today?" If the front-line rep doesn't satisfy, ask for his/her direct supervisor. Then move over to customer retention. If you don't use your trump card of offering to abandon them unless they actively compete for you, they have no incentive to compete for you. It's sad that many customers don't act because of their unrealistic fear of being seen as a troublemaker by an authority figure like a credit card company: the top (unrealistic) barriers in people when phoning creditors: fear of retribution and a sense of shame and undeservedness. The big discovery awaiting such people: entire departments are hired to keep customers happy, delighted.
2. Entire web sites are devoted to comparing the terms and rewards of credit cards. Comparisons are by category: secured, rewards, etc. Moreover, the marketing departments of credit card companies spend about $200 to capture another user successfully, and part of that expense is designing cards that have innovative and competitive terms and conditions. Put the following 3 words into a browser:
compare credit cards
and start comparing based on your personal needs. Mark your calendar to do another check up in about 2 years, after new products have arrived. And if you're wondering whether an offer is really a good deal or has catches, know that other web sites are specialized message boards in which people discuss the details of such offers and people's experiences with them. Browse on:
message boards credit card
The cost of getting a card with better rewards? 10% of your FICO score is about hard inquiries into your credit history when you apply for credit. You'll lose a few FICO points for each credit card company's inquiry, but you'll get the points back over the following two years.
And don't close your unwanted old cc accounts if they've been open longer than any of your open cc accounts. 15% of your FICO score is about length of credit history. Close a card that was opened long ago and it could hurt your FICO score. Check your credit report under Date Opened to be sure. Closing a cc account can never improve your score, but it can hurt your score.
Please vote: Did this help?
September 3rd, 2009 at 9:10 am
Each card you apply for lowers the score 7-11 points. Have 3, THREE, good trade accounts, never run them to the limits but keep the balance below 30% of the available credit on all of them, and pay them off when the bill comes in.
That builds your credit.
Inquiries by credit card companies stays on your record for TWO years, the credit history stays MANY years if it is good and 7.5 if it is bad.
You do not need 20 or 30 charge accounts, each has a limit on it and potential from a creditors point of view that could at any given time be your total debt if you ran them all up.
September 3rd, 2009 at 7:25 pm
Try getting an online auto loan quote. http://www.autoadviceonline.com/Auto-Loans.html The form will let you know if you can be approved. It's free and you can get an answer in minutes.
September 4th, 2009 at 3:58 am
Check out Capital One. I was approved four months out of chapter 7. The link will show you all that they have to offer, is set to "credit needs improvement", check the other tabs if you think you might qualify. If you are approved it will be no less than $300, and when you make your first 3 payments on time they bump it to $500. Has a fee of $19, billed at close of first monthly cycle, then yearly.
Those "load as you go" cards are secured cards, and you have to have absolutely horrible credit to go that route. If I had $300-$500 to set aside as a deposit and sit on it for a year, plus pay the fees associated with opening an account, just in hopes of getting a un-secured card for $300-$500 a year from now, I would go open a CD at the bank and let it build interest. The bank would be more apt to give you a loan in a month or two, especially if you pledge the CD, and let the lender know you are trying to build your credit – with their services.
September 4th, 2009 at 3:40 pm
Only if you do not manage them well.
The number of credit cards a person has is not important, how they manage them is.
Keep your balances below 30% of your credit limit and pay on time every month and you will be fine.
I had 14-credit cards at one time and my score was over 750. I only have 8 now and it's still over 750 because I manage them well.
September 5th, 2009 at 9:00 am
$20k is not that high for a combined total in credit limits – unless you only make $5k a year.
As long as a person takes care of their credit, having limits that meets yearly income or even exceeds yearly income could gain that person not only high scores but also creditors offering products with excellent terms attached.
Again, as long as a person is taking care of their cards by keeping utilization down, paying on time (preferable in full), never going overlimit, etc. (which is what you say you are doing)
The "only" time you should really carry a balance and make payments on a credit/charge card is when you have a 0% interest promo for x number of months.
Since you state that you have no problem controlling your spending and you pay in full every month, you are proving to all creditors (current and future) that you are a good risk.
I wouldn't recommend cancelling the cards that the promo's have expired.
You might keep the cards locked up and pull them out every once in a while, make a small purchase then pay when you get the statement. Allow them to continue to raise your scores.
It sounds like you should have a decent credit history, by what you have posted. So closing the occasional card should not have a major impact on your scores
But opening cards for the promos, then closing them after the promo's expire will show an unstable credit history and will eventually send red flags to any future creditors. You will probably find it harder and harder to be approved even if your scores are high.