Thursday, July 19, 2012

Getting Credit Cards With Bad Credit Is Possible With Compromises

Modern life dictates that a credit card is an important tool, as much as a source of credit finance. After all, how else can we book a hotel, buy an airplane ticket or do any of our online shopping? But it can be very difficult to get credit cards with bad credit, and not impossible.

The fact is that, with the weight of low credit scores, it is only to be expected that card issuers will hesitate to approve a credit card. Often, the first casualty to borrowers with poor scores is the credit card, with that bill usually left until last to be paid. Granting fast card approval is likely when the applicant has an excellent record of paying their credit card bills.

However, a fast rejection is likely if such a record is poor. Those that are willing to take the risk and approve the application, usually insist on a number of conditions. This is where compromises need to be made, though there are always credit card options to choose from.

Interest, Fees and Charges

When applying for credit cards with bad credit, the most likely compromises to accepted are an increase in interest rates, fees and other charges, as well as the absence of some commonly introductory incentives.

The chances of fast card approval are practically nil, but if the card issuer assesses that the risk is worth it, then they will try to cover that risk with a higher repayment rate. This can mean interest as high as 25% might be charged on the credit balance, compared to the normal 11%-14%. So, when ,000 is spent, then a repayment of ,250 has to be made.

It is also likely that a high annual fee will be charged, and that the normal 0% APR introductory offer is dropped. If the credit score is not too low (600 - 650), then the issuer may only reduce such incentives to shorter period of time - like 3 months instead of 6. But there are still credit card options.

Lower Credit Limits

Arguably the most significant restriction relates to the credit limit that is granted. Issuers know that mistakes of the past do not mean mistakes in the future, so they are willing to grant credit cards with bad credit. However, the credit available is very small, between 0 and ,500.

This may seem pointless to have, but it does give a chance to the cardholder to develop a positive track record over time. Most issuers who grant such limited credit balances are willing to review the limit after a stated period of time - perhaps doubling the limit after 12 months. And as the trust level improves, such benefits as fast card approval are also restored.

What this means, of course, is that credit card options increase as a firm record in bill payment is developed. If nothing else, it makes accepting the compromises well worth the effort.

Avoiding the Extra Fees

The higher fees and lack of incentives might seem unfair, but it is worth taking into account that controlling ones own spending habits is the best way forward anyway. The problem with seeking credit cards with bad credit is that the chances of repayment is considered low too. But by controlling spending closely, and making payments consistently on time, issuers have a firm idea of how real that risk is.

Though fast card approval is an attractive feature, more important is rebuilding a credit rating that will see interest rates lowered again, and such incentives as bonus points and 0% APR for the first 6 months returned. Biting the bullet to achieve this is something that has to be done.

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