Never Assume Better Credit Card Rates Are In Your FutureApril 6, 2011 - 8:45 am
If you have less than perfect credit and are trying to find a credit card you can get approval for, it is really important to first understand exactly what you are getting yourself into before you apply for a credit card.
Many consumers are coming from a place of past financial issues today. There are a number of reasons behind the credit failings of consumers including not enough personal finance education, job loss, and money mismanagement. Whatever the reasons for the issues of the past, it is likely your credit is still suffering some side effects. Even with less than stellar credit score, there is probably a creditor out there willing to approve your application. However, along with the approval come typically higher interest rates, penalty costs, and annual fees.
Bad Credit Considerations
When you are comparing credit cards that are geared towards poor credit scores, you will find several that meet your needs for which you can get approval. However, there are some specifics you need to watch out for besides just your ability to get that approval.
Here is a look at some of the bad-credit credit card characteristics you should be looking out for before applying for a new credit card:
APR – The interest rate on the credit cards designed for imperfect credit usually is much higher than cards offered to stable credit score owners. You may be paying 20-25% in interest which is a big chunk of change, especially if you are on a limited budget. You may not be able to find rates as low as 5% but certainly should compare all credit cards to see which offers the lowest rate. Never assume that after using the card wisely for a few months that you will be awarded a better APR. Most creditors will still consider you a risk as long as your credit report has a negative history associated with it.
Terms and Conditions – Bad-credit credit cards may have stricter terms and conditions including shorter grace periods and fees substantially higher if you miss a payment or default completely. Ideally, you should not be applying for or using a credit card if you’ve had difficulty in the past staying below your means. However, you need to be clear on the consequences in the event you do not mean the obligations of the credit card agreement.
Annual Fees – There are some credit cards that will charge a discounted annual fee for the first year but during subsequent years, the annual fee actually goes up. This may be a plan to bring in more new customers but it can hurt your bottom line when you have to continually pay out a higher amount for simply having a credit card. If you have multiple cards, these annual fees can cost you a few hundred dollars annually – money which might be better spent elsewhere or saved in an interest-earning account.
Never Randomly Apply – If you are afraid you won’t be approved for any cards and randomly applying for all of them, know this will hurt your credit even further. Lenders and creditors want to be assured you have a plan to manage credit and debts reasonable. By applying for ten credit cards in one day, you certainly are not showing responsibility with your financial life.
Bad-credit credit cards are out there and likely there is one right for you. It is important to take the time and shop around for different cards with different terms until you find the most suitable conditions for you.