Credit Cards For Poor Credit – Good Or Bad?
There’s always two sides to an argument and that’s certainly true when it comes to credit cards for poor credit – use them correctly and manage them well and they’ll be your best friend but use them inappropriately and they can turn a poor credit rating into bad, really bad, in the blink of an eye!
There are a growing number of UK poor credit card providers which reflects the decrease in those still retaining a perfect credit history and the mainstream financial institutions reluctance to lend to those with poor credit. These providers are also happy to accept those new to the world of credit and hence without any history at all and who may also find it difficult to obtain finance.
These companies don’t cater for the poor credit market out of sympathy though – they are businesses whose sole intention is to make money and where there’s increased risk so there’s increased costs and reduced limits.
So, even if your credit history is poor or non-existent, there may still be a credit card out there with your name on it but before you hit the apply button take time to consider the positives, negatives, advantages and risks.
Poor Credit Credit Cards – The Positives
A credit card is almost a necessity these days and offer the security, flexibility and convenience we need. Almost anything can be purchased on a card and from almost anywhere from corner shops to online retailers. They can also be used wherever we are in the world and whatever we purchase is often insured too.
When we talk about poor credit credit cards we mean standard credit cards but specifically designed for those with a less than perfect credit rating. They still offer all the features of a normal credit card but usually come with a higher interest rate, sometimes increased fees and normally a lower credit limit.
The benefits of a credit card for poor credit are therefore:
- Flexibility: The freedom to buy what you want, where you want and from whom you want – wherever you are across the globe.
- Convenience: Travel without carrying cash, save on currency exchange rates, buy that bargain now and pay later
- Peace Of Mind: Fast access to finance in case of emergency.
- Borrow For Free: Some credit cards offer 0% interest for a specific period – effectively an interest free loan.
- Consumer Protection: Money back for faulty goods and cover for fraud … a credit card is one of the safest ways to buy.
- Rebuild Poor Credit Rating: Use wisely, stick within limits, pay on time each month and you’ll soon find limits being increased and credit rating rising.
Sounds great so far doesn’t it but, as we said earlier, there’s always two points of view …
Credit Cards For Poor Credit – The Downside
As you might expect though, it’s not all good and there are risks and negatives to consider:
- Temptation: Having access to all that credit can lead to the temptation to make questionable or extravagant purchases that you later regret.
- Hidden Costs: Pay late and you’ll almost certainly be hit with an additional cost which will vary between providers but could be quite high in the case of a credit card for poor credit.
- High Interest: If you don’t pay off your credit card in full each month the balance will be subject to interest which can be pretty high particularly in the case of poor credit credit cards.
- Increased Debt: Credit cards are obviously a form of lending and flexible as they may be you can easily find yourself with spiraling debts.
- Credit Rating Risk: Use a credit card inappropriately and don’t manage it well, exceed your limit or be late with your payments and it will be recorded on your credit file which will obviously have a detrimental effect on your credit rating.
Poor Credit Credit Cards- Good Practice
Look after your credit card and it will look after you – learn credit card good practice:
- Aim to pay off in full each month.
- Only buy what you can afford to buy in cash – that way you can pay off your card in full each month.
- If you need to use your card in an emergency that you hadn’t budgeted for then make sure you pay it off as quickly as possible.
- Check you statement carefully each month – mistakes do happen.
- Set up a direct debit for payment to avoid the risk (financially and to credit file) of late payment.
- Avoid taking a cash advance on your credit card as this can be a very expensive way to access money.
- Contact your provider immediately if you are struggling with your debt or if your circumstances change – they will help you through any issues you may have.
Think about the points raised in this article and then compare against your reasons for considering a credit card. If you intend to use the card in the right way and know that you are able to do so then it could be your best friend. If you have any concerns though then think again, very carefully.
A credit card for poor credit can not only provide the convenience, flexibility and security of a standard card but can actually help you rebuild your credit history and re-gain the confidence of lenders again … but only if you use it well.