Bad Credit and No Credit Credit
Cards: Avoid Hidden Fees an |
By Jeff Weber |
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Individuals with problematic credit histories often suffer unfairly
from high mortgage, insurance, and car loan rates. On top of that,
they have difficulty getting approved for credit cards. The whole
situation can get extremely frustrating. Frequently, I get emails
from consumers wondering what they can do to rebuild their credit.
The first thing I tell them is to get a credit card designed for
people with bad credit. The second thing I tell them is written in
bold: READ THE FINE PRINT.
There are only a limited number of
credit cards for individuals with bad credit. At first glance, many
look the same. They all help build and rebuild your credit by
reporting to the major credit bureaus on a monthly basis. They all
provide you with the Visa or Master card you need to make many
purchases. And they are all necessary evils that can save you
thousands of dollars in mortgage and car loan rates in the future.
However, you must read the fine print before applying for one of
these credit cards, as they often charge high yearly fees, set-up
fees, and even monthly fees. Here, I will examine a few examples of
charges current bad credit credit cards bury in the fine print. Of
the three major cards I will examine, only one stands out as
consumer-friendly.
Bad Credit Credit Card #1: This credit
card charges a very low interest rate for an unsecured credit card.
However, your first fine print glimpse reveals that there is a one
time setup fee of $29. Not too bad. So far, since the next charge is
a one time fee of $95. So far, we're up to $124 in expenses. That's
got to be it, right? No. Add in another $48 for the annual fee and
$6 per month in account maintenance fees. That's brings the cost of
your new credit card to $244 the first year, and $120 each
additional year. This is no small change, and a card such as this
should be considered only if you cannot be accepted for a better
unsecured credit card for bad credit.
Bad Credit Credit Card
#2: This credit card charges a very high interest rate for an
unsecured credit card. This can't be good. But the setup fee is only
$29. Maybe this card isn't so bad. There is that pesky monthly
maintenance fee of $6.50 per month which brings the cost of this
unsecured credit card to $107. Maybe we've found a bargain. Not
quite. The annual fee is a whopping $150. Yes, $150 every year. That
not only brings the initial cost up to $257, but you will also pay
$228 a year just to maintain the credit card. There has to be a
better offer.
Bad Credit Credit Card #3: This credit card is
available as both a secured and unsecured credit card, based on the
issuer's review of your credit history. The interest rate is
average, even competitive. Now, the fine print reveals that there is
a one time setup fee. However, based on your credit, this fee can be
as low as $0 or as high as $49. So far so good, especially if your
credit is not that bad. But, there must be a huge annual fee. Not
exactly. The annual fee for a secured credit card is only $35, and
for an unsecured credit card, this fee can be as low as $39 or up to
$79. So far, the cost of this card ranges from $35 to $128. Now its
time for the monthly maintance fee. This one has to be huge. Or not.
Its $0. That means the most you could possible be charged to obtain
this credit card is $128, about half of what competing cards are
charging.
Clearly, there are substantial difference between
bad credit cards. Of the three offers we have examined, only
one doesn't take you to the cleaners. In fact, bad credit card #3
provides great value. All positive changes to your credit history
and credit score will translate into lower loan rates, lower credit
card interest rates, lower insurance rates, and ultimately,
thousands of dollars in savings. The path to rebuilding credit has
its costs, but in the long term, rebuilding your credit with a bad
credit card is the fastest and most cost-efficient way to correct
the often unfortunate circumstances that have damaged your credit in
the first place.
2006 Credit Card Depot Inc. |
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