Bad Credit and Credit Cards - Should I Go Secured or Unsecured?

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Even with lenders tightening their restrictions on who is eligible to receive credit cards and loans, you can still receive an unsecured credit card, even with a bad credit history. However, just because a card is unsecured, that doesn't mean that it will be free of extra fees or higher interest rates. In fact, these are some of the many costs of bad credit -- a higher APR, or Annual Percentage Rate, and typically a monthly or yearly membership fee will be applied to any cards that you receive, especially if they do not require any collateral or a security deposit.

There are companies, even today, that will work with those who don't have the money for a security deposit and those who have a poor credit history. However, it's not out of the kindness of their hears that these creditors do this -- they're in it to make money. So, expect to pay extra for the privileged of having a company extend credit to you. And, while it will take some time, if you make your payments on a timely basis, you will improve your credit score and will be able to qualify for better credit cards, with lower fees and higher credit limits, in the future.

All that said, while there are companies who will help you re-establish your credit history, albeit through high interest rates and membership fees, there are also companies whose offers do little more than allow you to dig yourself deeper into debt. These creditors offer you a card with a low credit limit, and then in lieu of a security deposit, they deduct several different types of fees from your available balance even before you receive the card.

What this means is that, even if you haven't physically received your new card yet, you may already be paying interest on your 'purchases'. These offers, while legal most of the time, do little to help you re-establish your credit history because when you receive the card, you already have $100 or more on the card for the various fees charged by the creditor and can be difficult to repay if you don't have the money available.

There are different cards available to those with bad credit, and there are several options for those who want to obtain a card without a security deposit. However, because many of these bad credit credit card companies apply hefty membership fees and various other charges -- some before you even receive your card in the mail -- it's a very good idea for you to thoroughly research a company before you apply for one of their accounts. Just because a company offers an unsecured credit card, that doesn't mean it's the best, or only, offer available to you. Do your research, and only apply when you can live with the costs -- it'll be well worth it later on when you are able to get a better card with lower fees and lower interest rates.

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Source by Ron Jefferson