If you're suffering from bad credit, you probably won't have as many credit card choices as someone with good credit.
But that doesn't mean you shouldn't be prudent and examine your options carefully before selecting a card designed for bad credit.
Not all bad credit cards are the same! The terms and interest charges can vary greatly so be sure you do your homework before applying.
It can literally save you hundreds of dollars each year.
Among the credit cards available for people with poor credit, a secured credit card is one of the best options.
In order to qualify for a secured credit card, all you need to do is deposit money in a blocked bank account to guarantee the line of credit.
Your credit limit is equal to the amount you deposit.
As you comparison shop for a card, keep in mind that if you make it a habit to pay off your balance in full each month, you'll benefit more from selecting one with no annual fee and a longer grace period.
If you tend to carry a monthly balance, you're better selecting a card with the lowest annual percentage rate.
In order to evaluate the features of each secured credit card, you'll need to see their disclosure of terms and conditions form.
If you're doing this online, click forward until you find it and review it carefully.
Carefully compare the disclosure of each card and study the following: 1) Interest Rates This is the amount of interest you will pay each year.
With a history of poor credit, your yearly interest rate can jump as high as 32 percent, although each state can set a legal maximum.
Banks can choose to calculate the balance over a one or two month cycle and can choose to include or exclude your current purchases from the balance.
There are three primary ways to calculate the balance: A) Adjusted Balance The bank takes the balance you owe less any payments and then applies the finance charge.
Current purchases are not added to the balance until next month.
This method results in the least amount of charges.
B) Previous Balance The bank calculates the finance charge on the balance at the beginning of the month without including any payments.
C) Average Daily Balance The bank adds the total of each days balance during the billing cycle and divides by the total number of days in the cycle.
Any payments made during the cycle are subtracted to find the daily amount you owe.
Depending on the plan, new charges may not be included.
All credit cards must disclose their method of finance charge and the annual percentage rate.
2) Transaction Fee's Some banks charge you for every credit card transaction you incur.
Banks use this strategy to increase profits since half of their cardholders avoid service charges by paying off their monthly balance.
If you use your secured credit card frequently during the month, you're better off selecting a card with low or no transaction fees.
3) Beware of Low Introductory Rates Sometimes a bank will advertise a bad credit card with a low "introductory" or what's known as a "teaser rate".
Study the disclosure carefully because you may be surprised to find out the rate will skyrocket after a few months.
Plus if you have bad credit, your new secured card may arrive with a much higher interest rate than advertised.
4) Grace Period This is the interest-free period from the purchase date to the payment due date and applies only to accounts that do not carry a balance.
If you have a habit of paying off your monthly balances, be sure you have a grace period, otherwise you'll be paying extra interest.
5) Credit Limits Banks will set your card limit based heavily on your credit rating.
This limit includes all purchases, cash advances, balance transfers, fees, and finance charges.
If you exceed the credit limit, expect to pay dearly in "over the limit fees", and possibly higher interest rates.
If you possess a bad credit card, expect to see astronomical interest rates if you exceed your limit.
Be sure to monitor your credit card balance and never max out your bad credit credit card.
This will only hurt your credit score.
It is the goal of this article to provide valuable insight into helping you select the best secured credit card for your financial needs.
Even though your choices among bad credit cards may be limited, that doesn't mean you can't shop wisely for your next credit card.
But that doesn't mean you shouldn't be prudent and examine your options carefully before selecting a card designed for bad credit.
Not all bad credit cards are the same! The terms and interest charges can vary greatly so be sure you do your homework before applying.
It can literally save you hundreds of dollars each year.
Among the credit cards available for people with poor credit, a secured credit card is one of the best options.
In order to qualify for a secured credit card, all you need to do is deposit money in a blocked bank account to guarantee the line of credit.
Your credit limit is equal to the amount you deposit.
As you comparison shop for a card, keep in mind that if you make it a habit to pay off your balance in full each month, you'll benefit more from selecting one with no annual fee and a longer grace period.
If you tend to carry a monthly balance, you're better selecting a card with the lowest annual percentage rate.
In order to evaluate the features of each secured credit card, you'll need to see their disclosure of terms and conditions form.
If you're doing this online, click forward until you find it and review it carefully.
Carefully compare the disclosure of each card and study the following: 1) Interest Rates This is the amount of interest you will pay each year.
With a history of poor credit, your yearly interest rate can jump as high as 32 percent, although each state can set a legal maximum.
Banks can choose to calculate the balance over a one or two month cycle and can choose to include or exclude your current purchases from the balance.
There are three primary ways to calculate the balance: A) Adjusted Balance The bank takes the balance you owe less any payments and then applies the finance charge.
Current purchases are not added to the balance until next month.
This method results in the least amount of charges.
B) Previous Balance The bank calculates the finance charge on the balance at the beginning of the month without including any payments.
C) Average Daily Balance The bank adds the total of each days balance during the billing cycle and divides by the total number of days in the cycle.
Any payments made during the cycle are subtracted to find the daily amount you owe.
Depending on the plan, new charges may not be included.
All credit cards must disclose their method of finance charge and the annual percentage rate.
2) Transaction Fee's Some banks charge you for every credit card transaction you incur.
Banks use this strategy to increase profits since half of their cardholders avoid service charges by paying off their monthly balance.
If you use your secured credit card frequently during the month, you're better off selecting a card with low or no transaction fees.
3) Beware of Low Introductory Rates Sometimes a bank will advertise a bad credit card with a low "introductory" or what's known as a "teaser rate".
Study the disclosure carefully because you may be surprised to find out the rate will skyrocket after a few months.
Plus if you have bad credit, your new secured card may arrive with a much higher interest rate than advertised.
4) Grace Period This is the interest-free period from the purchase date to the payment due date and applies only to accounts that do not carry a balance.
If you have a habit of paying off your monthly balances, be sure you have a grace period, otherwise you'll be paying extra interest.
5) Credit Limits Banks will set your card limit based heavily on your credit rating.
This limit includes all purchases, cash advances, balance transfers, fees, and finance charges.
If you exceed the credit limit, expect to pay dearly in "over the limit fees", and possibly higher interest rates.
If you possess a bad credit card, expect to see astronomical interest rates if you exceed your limit.
Be sure to monitor your credit card balance and never max out your bad credit credit card.
This will only hurt your credit score.
It is the goal of this article to provide valuable insight into helping you select the best secured credit card for your financial needs.
Even though your choices among bad credit cards may be limited, that doesn't mean you can't shop wisely for your next credit card.