The credit cards for poor credit (sub prime credit cards), mostly begin with low credit limit and then usually carry very high fees with interest ranging from 25 to 30 % or more. In 2002 when the economic growth in US slowed down, the default fare for sub prime credit card increased as the result of which sub prime credit card issuers scaled back their operations.
The interest rates on these cards are now at 9.5 percent and can range upto 24 percent.
In many cases the, credit cards for poor credit may actually help the customers improve their credit ratings. Many of the sub prime cards usually send their reports to agencies like Transition and Equifax and in case of secured cards; the credit rating is often reflected in the type of card which is being reported. The companies which issue these cards say that the consumers who pay their loans and bills on time would see that they would get positive report within 90 days. These cards have a much higher rate of interest than the credit cards which are given to the higher credit rating buyers. They usually come with extra fees and lower credit limits. These cards are issued by both big and small financial institutions which only focus on sub prime lending business.
The sub prime industry has been in some sort of controversy as there has been accusation of unhealthy and predatory lending mechanisms and practices being resorted to have been recorded. This means the borrowers are not aware of the exact fees which are being charged from them for credit cards for poor credit nor are they aware that their interest rate would increase if the payment they make is late or the card holder exceeds his prescribed limit. They have very high interest rates which can reach up to even 30 % at some times.