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Credit Cards For Bad Credit
When you apply for a credit card, the deal you will be offered is largely based on your credit score. If you have a bad credit history many of the larger banks and credit card issuers will decline the application, but there are some providers which have specific credit cards for poor credit.
The lower your credit score, the greater risk you will be considered for borrowing money on a credit card. If you want to apply for an unsecured credit card then this means an inflated rate of interest to compensate for the perceived likelihood that some payments may not be met. The credit limit will also be lower. In addition, you will not receive the perks which people with a good credit rating may enjoy, such as cash back or air miles.
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A better option if you have a poor credit history is a secured credit card. You must provide the issuer with some form of security against the amount borrowed. The credit limit on the credit card is usually determined by the balance on a savings or current account. So if you have a savings account with a deposit of £500 then that will be how much you can borrow on your card - some card issuers will set the card limit at a slightly lower amount than the deposit in your account, but this varies between lenders and you will need to check their terms and conditions.
On a secured credit card, you may be able to increase your credit limit by making further deposits to your account. Additionally, if you have been making regular payments the card issuer may grant you an increase without requesting further secured funds, but this is down to the lender's discretion.
The final option if you have a bad credit history is to apply for a joint account, often with a family member with a good credit rating. This is the best option financially as the terms will the same as a 'normal' credit card in regards to interest rates, etc. However, you must be certain that you can make the payments each month. If you cannot, then your co-signatory will need to ensure they are able to manage the payments on your behalf. If they fail to do this, both credit histories will be affected.
Whichever type of card you opt for it pays to shop around. When it comes to credit cards for bad credit you will find some lenders charge an application fee, and most lenders will charge an annual fee on a secured credit card. In some instances, these fees are very small but the customer should be aware that some less reputable card issuers take advantage of people who have trouble obtaining credit, and charge extortionate costs.
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