Are Bad Debt Credit Cards Good For You? We Investigate

Are Bad Debt Credit Cards Good For You? We Investigate

Bad debt credit cards are supplied by credit providers to individuals with bad debt. How astonishing. Well, don't let your mind run wild just yet.

These types of cards operate by shifting of the debts due by you on your current, high interest cards to the bad debt cards having a reduced APR (at least over an agreed timeframe). Hence, this type of cards assists you with the consolidation of your debt. It will also assist you in getting some relief from the higher Annual Percentage Rate (APR) that you are experiencing on your current card.

These types of cards can be divided into two categories:

The first category is called Secure Credit Cards. These types of cards require some form of security i.e. you need to register and maintain a bank account with the supplier of the debt credit card. The percentage of your holding balance in your bank account calculates the credit limit on your new credit account you opened with your new credit supplier. Usually, this is 50 to 100 percent of the total balance of your bank account. This means that you are allowed to spend the money in your bank account. Hence these cards provide you with the convenience and other benefits associated with normal credit cards, even if you have bad debt. Security is critical for the credit provider and after all how do you trust a person with a bad credit rating.

The second category of bad debt credit cards is quite familiar to us. This type of card is used as a tool to consolidate your debt. The only difference is the way in which you acquire them and the purpose that this type of card will serve to you. These cards operate by transferring the outstanding balance from your current high interest card to the bad debt card with a lower annual percentage rate (APR). These cards will also assist you with your debt consolidation as well as receiving relief from the higher annual percentage rate (APR) on your current credit card. Both categories are good choices depending on your current financial position.

Some people accept both of the above categories of credit cards as bad debt credit cards while others tend to go with one or the other. So, what you regard as a bad debt credit card is really a matter of personal choice. Many of these types of cards who charge a significantly higher rate of interest are promoted in exchange that they can be utilised as a tool to improve an individual's credit rating. Of course if prompt payments are made and the balance of the card is kept below the limit, this will assist to construct a better credit profile. When using these cards you'll be working on improving your credit status, which in turn will make you less risky to the lender.

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