An unsecured card is one of the most popular on the market because it’s considered a regular credit card. It just means that you don’t have to pay a deposit or use collateral to receive your line of credit. The issuer extends credit based on many factors, including your credit history. Unsecured credit cards for bad credit can be a little harder to obtain, but they are available.
Poor credit is considered to be a score of less than 579; this signals to a lender that you’re a high-risk and that you might not pay on time or at all. However, it’s important to note that low scores don’t make it impossible to get access to an unsecured card. It just means that you might need to improve your credit score and be more responsible with your plastic money.
Risks Associated with Unsecured Credit Cards for Bad Credit
Many times, unsecured cards that give lines of credit to people with low scores tend to have a variety of fees associated with them. In fact, most people wonder if the card is actually beneficial and worth it. Therefore, it’s a good idea to know about the drawbacks so that you are aware of what is likely to happen.
First, high APRs are more prevalent. Regular cards usually have an APR that tops out around 25 percent. However, options for people with bad credit could have APRs that reach about 30 percent. The terms and conditions should tell you what the range is for the card, and you should expect to pay the highest APR listed.
Unsecured credit cards for bad credit also tend to have annual fees. Some of the better cards have such costs associated with them, but you also get perks, such as cashback or mileage. Options for people with bad credit rarely have any benefits other than the fact that you can use it when you need extra cash and can start to rebuild your credit. Sometimes, the card also includes service fees, which are charged each month. It lowers the line of credit and means that, even if you don’t put anything on the card, it still has a charge, albeit small.
Along with such, these cards tend to have processing or program fees on top of that. This is to open your account and gain access to your line of credit. It’s not typically found from major credit card issuers for people with good credit.
You do have many choices when it comes to an unsecured credit card with bad credit. Store lines of credit are excellent because the store is more likely to approve you, even if you have low scores. Many times, you can also get discounts and rewards for using the card. As such, they are reported to the three major credit bureaus, so you can work on rebuilding your credit, as well.
However, they do have limited use because you can only use them at that particular store. Along with such, store lines of credit tend to have high interest rates. If you go this route, it’s best to pay the card off in full each month to avoid any interest charges.
Of course, you can apply for a traditional credit card, even with low scores. You may not get approved, however, and this can show up negatively on your credit report. It might also be a good idea to search online specifically for unsecured credit cards for bad credit. That way, you can go with a company that is more likely to extend a line of credit. Just make sure that you pay close attention to the terms.