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Bad credit cards can be tempting if you have poor credit. However, if you apply for one of these cards, it is very important to read the fine print to completely understand what you are agreeing to when you apply.
Interest Rates
One of the problems that has been revealed recently is that many credit card companies have been guilty of business practices with credit card holders that are upsetting for card holders, particularly those who are already struggling to pay their bills. Very often bad credit cards charge higher than normal interest rates, ranging in initial interest anywhere from 14.5% to over 30%.
In many cases, not only is there an initial interest rate, but in cases where there is any form of late payment (with this particular credit card company or with any form of credit) the interest rate may be raised with no caps on how high the limit may go.
Another action that may trigger an increase in the interest rate is going over the credit limit. While the credit card company may allow the charge, they will also raise the interest rate every time a card holder goes over the limit.
Fees
Another key point to look for in the fine print is any fees that may be charged. In some cases, not only is there an application fee, but there is also a monthly usage fee, an annual fee and numerous other fees that are charged to bad credit cards regularly. It is not at all unusual to discover that a credit card you believed was a good deal turns out to be a deal that results in charges on a regular basis that you receive no benefit from because you did not actually purchase anything.
Deposits
One of the types of credit cards that are often offered to individuals with bad credit is a secured credit card. Initially, it may not be obvious that this is the type of card you are applying for when you complete the application. It is often only when you read the fine print that it becomes clear that you will be required to open a checking or savings account with the financial company behind the credit card and that a portion of your deposits will be held as security for the credit card.
Unfortunately, in many cases, those deposits do not gain interest, nor are they available if you have an emergency and need access to your money. The good news is that usually these are bank accounts that are federally insured under the FDIC system, so if that bank fails, at least your money will be safe and insured.
Summary
If you are in a position where you have poor credit and need to have a credit card available, make sure that you read the fine print carefully and fully understand what you are agreeing to with that particular credit card company. In many cases there are details about interest rate increases, payment requirements and the potential for additional charges, including regular fees that are charged to the card by the credit card company.
Bad Credit Cards: The Truth Within The Fine Print
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