Credit Cards for Folks with a Bad Credit History
A Credit Article Contributed by Mark Mcclelland
The Credit Card Options for Those with Bad Credit Histories
Alright, so you have a credit card history so bad it positively reeks. You can't borrow a penny to save your life, and in fact the last time you mailed in an application for a credit card in the pre-addressed envelope your application was marked "return to sender - no such person".
One tries to make this funny but it's really not. In fact it can be deadly serious. After all, you're not a criminal, an intentional scammer, or a scofflaw that simply wants to use the system for everything you can can get out of it. You really are a basically honest person simply trying to get by.
But the fact of the matter remains that we all have to live somehow, and the credit card issuers have managed to make it abysmally difficult for us to live without using their wares. For example, more and more of our purchases are being made on line, and all on line purchases require plastic of some sort don't they?
Ahhhh, yes, but what sort or plastic. There are actually several sorts of credit cards available and at least a couple make it more difficult to get yourself into trouble; namely secured credit cards and debit cards.
What are Debit Cards and Can They Help Rebuild Bad Credit Histories
Debit cards are issued by most of the big name card issuers you're all familiar with: Bank of America, Wells Fargo, Wachovia, Bank One, and others, and when you use these cards they draw funds directly out of your bank account(s)- just like writing a check. Since your purchases are listed on your monthly bank statement it's easy for you to track your purchases; this also makes it easy to watch for and fix any bad spending habits that may develop.
These cards make it possible for you to make purchases on line, in situations when you don't have cash or your check book, or withdraw cash via ATMs. And these cards are especially useful when other card options might not be available to you, such as following a filing for bankruptcy.
Unfortunately, since these cards are drawing directly from your own bank accounts, there's no credit involved, thus no reporting to the credit reporting agencies, thus no improvement in your already bad credit history.
How Best to Use Secured Credit Cards to Rebuild Your Bad Credit History
The other option is to apply for a secured credit card. Like debit cards, these cards are issued by most of the large card issuers, although they may not make it obvious that they do so. Secured cards require an up front cash deposit, placed in an appropriate security account, like a savings account, or a money market account, that becomes the credit line (credit limit) for the card. As an example, if you deposit $1000 in a special savings account you can use your card to charge up to $1000. You may even be able to increase the amount deposited in order to increase your credit limit.
The good news here is that this is a real credit card, just like the more traditional cards. When you use this card the card issuer is lending you money - up to your credit limit. And just like traditional cards, you must repay these loans - along with any interest applied - in monthly installments until the debt is paid off. The difference between this and the more traditional cards is that the security deposit you made is used by the card issuer as your collateral for the loans they're making to you.
And since this is a real credit card, the consistency and timeliness with which you make your payments is periodically reported to the credit reporting agencies. This could - over time - help rebuild your credit history. On the other hand, if you fail to make timely or consistent payments, it could further damage your credit history. If you actually default, the card issuer will claim your security deposit and you'll be worse off than you were before.... There's just no silver bullet to rebuilding a bad credit card history is there.
