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A Guide to "Bad Credit" Credit Cards

There are are number of credit cards and prepaid debit or credit cards for individuals who have suffered bad credit ratings or have bad credit histories. Many options are available to assist individuals with less than perfect credit build, rebuild, or repair a bad credit history caused by financial difficulties and other unfortunate circumstances. Many credit cards exist to help people rebuild credit scores and transform bad credit histories into better credit histories.

How To Rebuild And Repair Bad Credit

People with bad credit can rebuild with careful financial planning. Ensuring the timeliness of payments and proper maintenance of credit accounts is a timely but necessary process which can greatly improve overall credit standing. Many secured and unsecured credit card options are designated to repairing bad credit. Those with bad credit scores may improve their credit with prepaid credit cards, secured "bad credit" credit cards, and unsecured no deposit "bad credit" credit cards. Pre-applying for credit cards via the mail, online, or by phone is often imperative as individuals attempt to improve credit ratings. As any denied credit application reflects poorly on credit histories, pre-qualifying prevents any further damage to already bad credit reports.

Prepaid "Bad Credit" Cards

A prepaid "bad credit" credit card is beneficial to individuals with bad credit histories. Choosing a prepaid "bad credit" credit card offered by a consumer credit counselor or credit building company which reports account holder's financial management to major credit bureaus allows individuals to improve credit ratings and credit scores. Prepaid "bad credit" credit cards require account holders to spend only the funds deposited into an account. Prepaid "bad credit" credit cards provide account holders the ability to rebuild credit and prevent the risk of late payments, exceeding credit limits, and the many other financial aspects which contribute toward bad credit scores. Prepaid "bad credit" credit cards work similarly to debit cards. Most prepaid "bad credit" credit cards have no annual fees and limited to no processing fees if account holders choose specific deposit options and use the card for a specified number of purchases during a billing cycle.

Secured "Bad Credit" Credit Cards

Secured "bad credit" credit cards require account holders to deposit the amount of an initial credit limit with the issuing credit card company as a security. Secured "bad credit" credit cards function similarly to regular credit cards though account holders are limited to the amount of available credit to the amount deposited. Many secured "bad credit" credit cards have fees related to the operation of the account and also have late payment penalties. The funds originally deposited for secured "bad credit" credit cards are generally retained for a thirteen month time period. Following the demonstration of financial responsibility by the account holder, secured "bad credit" credit card companies refund the deposited funds to the account holder. Following the the holding period, secured "bad credit" credit cards generally become "unsecured" and credit account holders may qualify for an increased credit limit and improved credit ratings.

Unsecured "Bad Credit" Credit Cards

Unsecured "bad credit" credit cards also help individuals with bad credit improve credit histories. Unsecured "bad credit" credit cards have low credit limits, generally high APR fees, high monthly fees, and typically high annual fees, as well as high operating costs with up to 25% of the allowed credit required for set up fees. Unsecured "bad credit" credit cards are a quick yet expensive way to improve credit ratings but may undermine the advantages of having a credit card because of costs associated with operation of the account. Unsecured "bad credit" credit cards are only advisable if those with bad credit histories can not acquire a prepaid or secured "bad credit" credit card.

Summary

Though it is difficult to repair bad credit, "bad credit" credit cards are an excellent foundation to start to rebuild damaged credit scores. As many "bad credit" credit cards are somewhat expensive, carefully comparing various options and all fees associated with any credit card offer is often key to establishing a brighter financial future.

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