The great recession has taken a toll on the credit ratings of people throughout the country.
As property values dropped and jobs were lost, people were unable to carry their debt and lost their homes and other property.
As a recovery gets underway, many of these same people want an opportunity to rebuild their credit scores in hopes of again being able to buy large ticket items on credit. These people might to be surprised to find out that there are credit cards for poor credit available to assist with bad credit issues.
What Are Secured Credit Cards and Bad Credit Unsecured Credit Cards?
Secured Credit Card
When an individual is trying to rebuild credit, a secured credit card is the easiest card to get.
The credit card requires that the applicant put up cash as collateral against the credit card. The amount is held in “escrow” and the card is issued. The card can be used as a normal credit card, but the credit limit will, in most cases, be set equal to the security being held.
If the cards holder exhibits good credit behavior over a stated period of time (usually 1-3 years), their collateral will be returned and the card gets converted to a standard credit card. These cards usually have high interest rates and annual membership fees. However, according to the Credit CARD Act of 2009, fees cannot exceed 25% of the borrower’s credit limit.
Unsecured Credit Card for Bad Credit
Unsecured credit cards targeted to individuals with bad credit are not easy to find, but they do exist.
They will require heavy fees and dictate high interest rates. Most of these cards have limited or no rewards programs tied to them. People with severe credit problems should not see these cards as anything more than an opportunity to acquire a low credit limit card that can be used to help reestablish good credit habits.
These cards should also be used on a limited basis. Again, the Credit CARD Act of 2009 is applicable.
The Best Credit Cards for Bad Credit
Here is a listing of credit cards that give people a chance to reestablish their credit rating while protecting them from further issues.
- Digital Federal Credit Union Secured – This is a very unique secured credit card. It has no annual membership fee and an APR of only 11.5%. The card is only for credit union members, but membership only requires a $10 charitable donation to “Reach Out for Schools”.
- Applied Bank secured MasterCard and Visa – This card’s main attraction is an incredibly low APR of 9.99%. The credit limits range from #200-$5,000 which is higher than most cards. The annual fee is low at $50.00. The downside on this card is the lack of a grace period for late payments.
- Capital One® Secured MasterCard® – This card has three unique features. (1) $29 Annual Fee (2) A credit limit of $200 might be approved with as little as $49 of security (3) The cardholder has 80 days to submit the security requirement.
- First PREMIER Bank unsecured MasterCard and Visa cards – This card makes the list because it is unsecured. The APR on regular charges is only 9%. The initial approved credit limit will be a minimum of $250 with a review after 6 months that might earn a limit increase. The downside of this card is the 19.90% APR on cash advances with no grace period. Also, the card is encumbered by heavy fees for everything imaginable. This card could work out well if the cardholder follows the rules.