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Credit Cards For Bad Credit

Credit Cards For Bad Credit: Do they really help?
With the rise in delinquencies and lack of affordability, there’s been a surge in credit cards for bad credit people. These cards are primarily aimed at people with poor credit histories. This could be due to a variety of reasons – inability to pay the mortgage bills, insufficient household income, high interest rates etc. Bad credit credit cards help such people to overcome existing cash crunches. However, it is mostly a vicious cycle and having more cards just adds to the problem.

Types of credit cards for bad credit
There are primarily 3 kinds:

Prepaid cards:
These types of cards do not entail any extension of credit. To use these cards you need to deposit a certain amount of money with the bank. This money will be your ‘credit limit’. The functionality is very similar to that of a debit card. However, you cannot use such cards to rent a car or book a hotel room. These cards do not help in your credit history as well simply because there’s no credit that’s being extended.
Secured cards:
In these kinds of cards, you need to deposit a certain amount of money with the bank. This in turn will determine your credit limit. All the other features and functionalities are exactly the same as that of a normal credit card. If you default on the payment, the money in the savings account is used to refurbish the deficit. Also, many banks will not report to the credit bureaus so be sure to check this factor. Else you may end up paying a lot – for no reflection in your credit history! Also interest rates and fees are higher on secured cards as compared to normal credit cards.
Unsecured cards:
These are just like normal credit cards – except that interest rates and fees are much higher than the market rate. Even the credit limit on these cards isn’t very high. Usually your payment performance on the secured cards is reported to credit bureaus. That can help improve your credit rating. Also if the payment pattern is good, you may be eligible for a higher credit limit.

Features offered to help people with bad credit
There has been a huge rise in the number of people with bad credit. This has led to many credit card companies offering cards with special features to help such people out. However, banks also have an underlying purpose in it – the prospect of getting more money, earning more interest and collecting fees – is enough for them to start this line of credit cards.

No upfront fees:
Many credit card companies realize that customers are as it is facing a tough time in paying off their debts. To ease their situation a bit, these banks provide credit cards with no upfront fees.
Reports to credit bureaus:
People with bad credit are always trying to improve their credit rating. Therefore they always make a conscious effort to pay on time and as much as they can afford. However all this doesn’t make sense if the improved payment patterns are not reported to the credit bureaus. Therefore most credit card companies today report such payment patterns to the credit bureaus. This helps in improving the credit rating. Some credit card companies even report to credit bureaus on a monthly basis, which accelerates the process of improving credit rating.
Low APR:
Lack of affordability is such a concern among people with bad credit that they always look for discounts on their purchases. Usually these purchases are for basic necessities like food, clothing and rent. Having a lower Annual Purchase Rate on the card can mean making more purchases.

Credit cards for bad credit are not always as malicious as they’re made out to seem – there are companies who genuinely wish to help people in need.

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CREDIT CARD TYPES

Choosing the credit card that's best for your needs and situation starts with knowing what options are available to you. The following list details the most common credit cards available:

	Balance transfer credit cards - Balance transfers are a way of transferring outstanding balances from existing credit cards to another card that offers a lower interest rate. For example, if you your have a high annual percentage rate (APR) credit card with a significant outstanding balance, you can transfer the balance to another card with a lower rate or even one offer zero interest. Typically these cards offer low balance transfer rates for a specified period of time allowing you to save hundreds (or even thousands) of dollars in monthly interest charges.
	Low-interest credit cards - These cards offer a low introductory annual percentage rate (APR) for a promotional period, after which they can change to a higher rate or a fixed-rate. If you plan on making a large purchase, it's a good idea to pick up a low-interest credit card to take advantage of the savings on interest during the introductory period.
	Cash rebate credit cards - Cash rebate cards accumulate "points" for1 every purchase you make using the card. Most cash reward cards award a point based off 1% of the purchase total, excluding interest and finance charges. For example, if you make a purchase for $1,000 the credit card will award you with 10 points (or, $10.00). These cards are great for loyal customers who make payments on-time every month.
	Reward credit cards - Reward credit cards are similar to cash rebate credit cards, but differ in that they offer various forms of "rewards" for the purchases you make. For example, you can accumulate rewards for frequent-flyer-miles, free magazine subscriptions, and even hotel and travel discounts. Ideal for those who enjoy getting something for free from their credit cards.
	Travel credit cards - Travel credit cards are ideal for the frequent flyer who travels the globe on a frequent basis. These cards accumulate significant reward points every time you make a travel-related purchase. You can gain discounted airline tickets, rent cards for free, and even get discounted hotel rates!
	Pre-paid credit cards - Pre-paid credit cards are ideal for those who are on a tight budget and don't want to fall prey to the financial pitfalls associated with standard credit cards. They work similar to gift certificates or debit cards. You deposit money into the card and then use the card to make purchases as you would a typical credit card.
	Secured credit cards - Secured credit cards are ideal for people with poor or no credit. They work on a collateral system, where you put up something of value against the debt on the card.