Bad credit unsecured credit cards
Hearing "bankruptcy" and "credit cards" used in the same sentence would not surprise anyone. High credit card debt bears responsibility for most bankruptcy. Yet the frequency of the following word combination always startles me: "I can not consider bankruptcy because I need a credit card." Such comments come not from people addicted to credit card use (people addicted to credit card use have usually abandoned this philosophy before they see a lawyer). These remarks come from those who recognize the importance of having a credit card for the many conveniences they offer in our society.
Ordering merchandise online and renting cars account for just some of the activities that require a credit card. While some individuals over blow the issue into a life or death situation, maintaining a credit card merits serious consideration. Bankruptcy renders those with bad credit as outcasts in the everyday world of unsecured credit cards. Luckily options exist beyond typical bankcards, which can provide people with bad credit all of the benefits of carrying a standard credit card enjoyed by those with excellent credit.
Unsecured Credit Card
Most credit cards fall into this category.
With a bit of research unsecured credit cards for those with bad credit do exist. The only downside to the reputable bad credit unsecured credit cards come in the form of lower credit limits, higher interest rates and the fact that those with very bad credit may still end up rejected.
Debtors must watch out for less reputable cards trying to take advantage of their situation. unsecured credit card rip-off goes like this: You get an unsecured credit card, maybe even with a high credit line, but it can only be used to buy merchandise from a particular catalog. The catalog prices get over inflated and the interest rates are very high. Only look at cards which offer national acceptance such as true Visa or MasterCards.
Secured Credit Card
Two elements come together to make a secured credit card. First, a savings account must be established at the bank that intends to issue the credit card. Withdrawing any of the savings balance results in a reduction or elimination of the credit line. Where a balance in the credit card remains outstanding, withdrawal from the savings account may not be allowed at all. Deposits required may range from Rs50.00 - Rs500.00.
Determining credit limits depend on one's credit and bank policy; minimums start at 80% of deposits and maximums at 300% or 3 times the deposit. Some banks review all applications before acceptance while others guarantee a card, under any and all conditions so long as the security deposit remains at the bank. Cards offered carry either a Visa or MasterCard affiliation; some cards offer your choice. Security deposit accounts earn a small amount of interest.
An important characteristic you may have to ask about concerns the card's credit reporting. The goal of simply having a credit card can be met by any of these secured cards, but in order to rebuild credit the new card must report the activity to the credit bureaus. Most cards report without any indication the cardholder maintains an associated security account. Anyone reading the credit report would never be able to tell the secured card from an unsecured credit cards. The problem comes from those banks that do not report their secured cards to credit bureaus at all. Anyone needing a rebuilding of credit must investigate which cards report credit card activity, and avoid cards which do not report.
After some time, usually several years, many of these companies will either increase the credit line of the secured card, or allow the card to convert to an unsecured card. Dont expect this to happen automatically. If you have been perfect with your card for over a year and want a change call the issuer of the card and ask.
Debtors facing bankruptcy often suggest they pay off one or two cards in order to leave them out of the bankruptcy and maintain the existing cards. Unless the balances on the cards are very small I recommend avoiding this strategy. A better idea, when possible, will be to use the money allocated to pay off the card to obtain a secured card. In the future the deposit for a secured card goes back to the depositor, payments made to a credit card prior to bankruptcy are gone forever.
Credit cards need not be feared, but they must be respected. Never forget even if your own personal problems had nothing to do with unsecured credit cards, that misuse of credit cards can easily lead to financial ruin. Credit cards have no rivals as keys to opening the door to many new technologies such as online shopping. Obtaining and wisely using a credit card can help repair both one's credit and self esteem following a financial disaster.
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