What Are Poor Credit Credit Cards?

Poor credit credit cards are exactly as the name suggests credit cards aimed at consumers with poor credit

. These people are likely to be turned down for normal credit cards, but could still benefit from the everyday uses that a credit card can bring.

The main difference with these cards is that they have less stringent approval requirements, but as a result also have revised terms and conditions to protect the card provider. This means that those with credit scores towards the lower end of the scale can still be approved for them.

There are three main types of poor credit credit cards: Unsecured, secured and pre-paid. Unsecured cards are the ones that have most in common with normal credit cards, as they work in much the same way. The cardholder is assigned a credit limit and pays a monthly bill.

The main difference is that poor credit unsecured credit cards often have higher interest rates than those for people with good credit, with above 19.9% APR not uncommon. These cards often also have annual fees to pay, and will cost the user more in maintenance fees in the long run.

The second group of poor credit credit cards is secured cards. These require the owner to make an initial deposit of their own money, which acts as a security bond and also becomes the credit limit. This means that the cardholder is spending their own money and not accumulating debt, as they would be doing on an unsecured card.

The final option and often the only one for people with very low credit scores is a pre-paid card. These require the cardholder to add funds to their account before they can use it. The card can then be used to pay bills, make online payments and withdraw cash until the amount of credit runs out and a top up is required before the card can be used again.

When shopping for poor credit credit cards it is even more vital than ever that you do your research and look at all of the fees and charges that come with owning the card. It is a competitive sector and some companies offer much better deals than others.

It is also important to look for a card that offers regular reporting to the three main credit bureaus of Equifax, Experian and Trans Union. This will allow you to rebuild your credit score, and eventually become eligible for better value credit products.

Due to the higher interest rates and more expensive fees and charges that these type of cards come with, it is only advised that you apply for poor credit credit cards is you have exhausted all other financial solutions, and if your credit rating is not high enough to get a better value product.

by: William Trustey

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