Well, the answer to this question is it depends on why you need a credit card to begin with. In most if not all cases, you need a credit card to rent a car or a hotel room. You also might need a credit card to cash a check. A whole other reason to have a credit card is to establish or restore your credit rating and credit scores.
Banks who issue credit cards realize that folks who have poor credit also need credit, so they have developed several types of bad credit credit cards that might serve your needs. These cards are: unsecured, secured, and prepaid.
Unsecured credit cards are probably the best for building your credit. These cards are just like regular credit cards, but they are more expensive to have and use, and they are limited to small credit limits. The credit limits on these cards are typically pretty low, somewhere around $300 with interest rates ranging anywhere from 9% to more than 20%. Be prepared to pay an annual fee that could exceed $100 a year. Banks who issue these credit cards typically report your credit history to the credit bureaus. If you make your payments on time, then your credit scores should begin to go up even after only a couple of on time payments. Make sure you check with the credit card company if they report to the credit bureaus. If they don't, then look for a different credit card company.
The next type of bad credit credit card is the secured card. The secured credit card is a good option for establishing or restoring your credit if the credit card issuing company reports your payment history to the credit bureaus. You'll also be required to put into an account with the bank some small amount of money like $300. What ever you put into the account becomes your credit limit. Unless the bank matches your funds with some of their own in which case you'll have a higher credit limit. Interest rates and fees for this type of credit card will vary from company to company.
The last type of credit card for bad credit is the prepaid debit card or prepaid credit card. This card will do little for helping your credit scores go up because your payment history is typically not reported to the credit bureaus. What the card can be used for is to pay bills in which case you could then show a payment history. This payment history could be used as a credit reference for a mortgage or rent application. Your credit limit is the amount of money you prepay. When you use up the money in the card, the card is done unless you put more money on it.
So these are the different types of bad credit credit cards available. Depending on what you need to have one of these cards will determine what you need to get. Make sure you ask the questions about reporting to the credit bureaus if you are getting the card to improve your credit report and credit scores.
Written by: Dale Stouffer
