A guide to bad credit credit cards

A guide to bad credit credit cards

People who have had money problems in the past may have problems getting approval for new financial products. Getting into these kinds of difficulties can result in an impaired or “bad” credit rating. This can simply make it extremely difficult to take out new products such as standard credit cards. Bad credit products may be an alternative.

What is Bad Credit?

Whenever a consumer takes out a financial account or a product such as a loan, mortgage or credit card this (and how they manage their account) will be listed on their credit record. This record is widely used by lenders to assess risk. So, when an individual applies for a new product or account the lender will look to see how they may have managed their money in the past.

People who make all their repayments as they should and who don’t get into financial problems will generally have a good credit rating. Those who run into problems will be seen as having a bad rating. Problems that can turn up on a record include:

  • Missing payments or making late payments.
  • Some debt management solutions such as IVAs and bankruptcy.
  • Debt related court action such as CCJs (County Court Judgments).

These factors act as warning signs that the individual may be a higher lending risk. This doesn’t always mean that the individual can’t get any finance. They may simply need to go to lenders who will approve their application.

What are Bad Credit Credit Cards?

If an individual wants to apply for a card then their financial track record will be looked at. If they have an adverse history then standard card companies may turn down their applications. There are some companies, however, who are more willing to give out a credit card even to those to have bad credit and some who specialise in this sector. These are generally known as bad credit credit cards.

What Are the Advantages and Disadvantages of Bad Credit Cards?

Like any kind of financial product these cards come with a range of pros and cons. Consumers would be wise to think carefully about these before deciding to make an application. The advantages include:

Individuals can get a credit card even with an impaired credit history.
In some cases they may not have to go through a stringent credit check to get approval for a card.
Managed correctly, these cards can help build a better credit history over time.

There are also some disadvantages that need to be considered:

  • The interest rates charged on these cards can be a lot higher than those given on standard products.
  • Not all card companies willing to give cards to those with bad credit will approve every application and may turn down people who have had particular issues in the past.
  • People with ongoing debt problems may get further into difficulties with card spending and high interest charges.

Some individuals simply find that a bad credit credit card is their only option in this sector. Making sure not to get further into debt and avoiding the addition of high interest can make this a workable solution for some. Consumers may benefit by looking at an online credit card interest rate comparison site first before choosing which card to apply for.

It may not be the best solution, however, for those looking to take control of existing debts. In those cases a specific balance transfer deal or a longer term debt management solution may be better options to take.

Pre-Paid Credit Cards Help with Bad Credit

A pre-paid credit card is the perfect solution for those that need a credit card, but have bad credit or adverse credit. It also helps those that wish to avoid personal debt and financial difficulties. A pre-paid credit card means that someone can only spend money they actually have.

No Credit Check Needed for a Pre-Paid Credit Card

Many conventional credit card customers will have a bad credit rating as a result of missed or late payments. It is useful to know that people who do have adverse credit will get a fresh start after a period of 6 years has elapsed. A pre-paid credit card can act as an interim solution for those with bad credit.

A person applying for a pre-paid credit card doesn’t require a credit check. This is because a pre-paid credit card doesn’t extend a credit facility as customers use their own money to pay for any purchases. This can help greatly in terms of preventing credit card debt and financial difficulties.

A Pre-Paid Credit Card is Guaranteed to be Accepted

Due to the fact that there is a no credit check performed, customers are guaranteed to be accepted for a pre-paid credit card. Many pre-paid credit card customers are delighted by this because they have been rejected on previous credit card applications.

Avoiding Debt Problems and Financial Difficulties

Pre-paid credit card customers use their own money, helping to prevent credit card debt or further financial difficulties. This means that there isn’t a high APR of 17.9% payable on credit card balances and late payment charges will be a thing of the past.

Obtaining the Best Pre-Paid Credit Card Deal

Those seeking a pre-paid credit card should always investigate different credit card deals prior to signing-up. There are different annual charges and commissions taken for the service provided. Using a pre-paid credit card comparison service can help in terms of identifying the best deal.

High APR Credit Cards vs Pre-Paid Credit Cards

There are credit cards available that are designed specifically for people with adverse credit, but they charge a high APR of upwards of 35%. Should someone choose to make only the minimum monthly repayment on credit card debt, this can only serve to exacerbate debt problems and financial difficulties.

Pre-paid credit cards are an excellent way of avoiding the perils of high APR credit card debt. Those with a bad credit rating wouldn’t be able to get a credit card. Pre-paid credit cards help someone mange personal finances, avoid financial difficulties and prevent personal debt problems.