Lenders report non-compliance to credit reference agencies each month which means that a missed payment will make it far more difficult to borrow money both now and in the future. Regardless of a bad credit history, a guaranteed credit card provides the consumer with a way to pay for goods and services and/or rebuild credit. There are several different adverse credit cards available so it is important to understand how each one works prior to making a decision.
Secured Credit Cards for Poor Credit
Based on the provision of collateral (typically property or a cash deposit), the customer can benefit from a substantial credit limit (upwards of $10,000). It is the ideal bad credit history credit card for those who use their card more regularly. Secured credit card providers report to credit reference agencies at month end which could help the customer recover from a low credit score. It is important to appreciate that failure to comply with the T&C's of a guaranteed credit card could lead to the sale of the collateral.
Unsecured Bad Credit History Credit Cards
Although it works in the same way as a normal card, the credit limit will typically be just $250. This could be increased by customer request after a period of just six months. The higher risk of default faced by the lender means that the rate of interest and/or charges will be higher. No collateral is required and lenders will report to credit reference agencies at the end of the month. However, it will usually be necessary to clear any upfront fees prior to using the card.
Pre-Paid Credit Cards for Bad Credit
Rather than being allocated a credit limit, the customer loads their own money onto their card in return for a small fee. As far as the merchant is concerned, a pre-paid credit card works in the same way as a conventional card. There is no credit reporting so it isn't right for rebuilding credit. It is very useful for improved cash management and avoiding debt problems as there is no credit facility.
Benefits of Guaranteed Credit Cards
Really bad credit credit cards are available for several different purposes. Secured and unsecured guaranteed acceptance credit cards will each help to rebuild credit. The provision of security is necessary for those who require a higher credit limit. Whilst pre-paid credit cards aren't designed to improve credit, they help greatly in terms of improved cash management. For those who have experienced money problems in the past, they also help with debt avoidance.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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