The Surprising Strengths of Low Credit Credit Cards

The Surprising Strengths of Low Credit Credit Cards
It’s difficult for people with low credit scores to get credit cards. Often, the only types available are secured credit cards, where you need to make a down payment that becomes the credit limit. Secured credit cards also tend to come with annual fees and high interest rates, so it’s easy to see why someone might not find them an attractive deal. However, there are some surprising benefits to having a credit card meant for those with poor credit. It’s worth checking out the options.

Anti-Fraud Protection
Probably the biggest advantage of having a credit card is the ability to make online purchases. While you can usually use a debit card to make those same purchases, if the debit card information gets stolen, it can take time to get your money back. That’s not as big of a concern when you use your credit card. Most cards offer anti-fraud protection, and they’ll quickly research the issue if your credit card information is stolen.

Low Limits
Most credit cards for those with bad credit have credit limits $500 or less. Many people see this as a big disadvantage. While it does mean that you are not likely to be able to use the card to purchase something like airline tickets, the low limit can also be beneficial. One of the easiest ways to find yourself into financial trouble is to charge purchases that you really can’t afford. Low limits stop you from spending well beyond your means. Even if you do spend more than you can reasonably afford, it’s a lot easier to pay off a $400 splurge than it is to pay off a $4,000 splurge.

Building Credit
When you have bad credit, you’re stuck in a bit of a cycle. Creditors don’t want to offer you money, which means that you aren’t able to show that you can be financially responsible. Getting a credit card means that you’re able to start building up your credit. It doesn’t matter whether the card is secured, whether it has a low limit or whether it has a high interest rate. If you use the card and make payments on time, you’ll start to increase your score. You should also be aware that you don’t have to carry a balance in order to improve your score. You can pay the balance off in full each month, which is the smart thing to do to avoid interest charges.

Tracking Credit
Some credit cards, such as the Capital One Secured Master Card, offer the ability to track your credit score and report online. This is a big advantage. Seeing your credit score go up month after month can be a big motivation to keep up the good behavior. It will also allow you to easily see if someone’s stolen your identity and opened up new accounts. Catching fraud early is the best way to minimize the damages it can cause.

Moving Up
Getting that first credit card and proving that you’re able to use it wisely is the first step toward getting better offers. With a better credit score, you’ll be able to apply for better offers. Some secured cards, such as the Wells Fargo Secured Visa, even periodically review your card and upgrade you to an unsecured status. Once you have better cards, you can choose to cancel your secured card and get back any of the money you put toward the deposit.

Credit cards for those with low credit scores are rarely ideal. You may even wonder whether it’s worth it to sign up. However, getting the card and using it responsibly starts to build your credit score and opens up the doors to other possibilities. If you apply for a card with this in mind, you’ll be a lot happier with your decision.

No comments:

Post a Comment

Related Posts Plugin for WordPress, Blogger...