For people with a spotty credit history or bad credit, getting approved for a standard credit card can be difficult, if not impossible. There are a number of credit card options that are aimed specifically at people who have bad credit and are trying to rebuild or repair it. There are also, unfortunately, a lot of schemes to take advantage of the desperation to get a credit card when no one else will issue one. How do you tell which options are valid ones and which are just taking advantage of a bad situation? Let's take a look at some the things that you should be wary of below. Catalog Clubs Disguised As 'Credit Cards' For People With Bad Credit. Some supposed credit cards offer to help people rebuild a bad credit history by making purchases from their catalogs. Products in the catalogs are often overpriced, and you can't use the 'credit card' anywhere else. While they will make reports to credit card companies with your balance and payment history, which will help to repair bad credit, it can be a very expensive way to acquire goods and clear up your credit history. Prepaid 'Credit Cards' To Help People Repair Bad Credit. Technically, prepaid credit cards are not credit cards, though they may bear a Visa or MasterCard logo. They're more like a debit card, without a bank account. The purchaser 'loads' the card with a deposit, usually with a minimum of $20 and a maximum of $500 to $5000. When you use the credit card to make a purchase, the amount of the purchase is deducted from your balance. When the balance reaches $0, you can't use the card until it is reloaded. Generally, you can reload the card at any time, though there is usually an upper limit to the amount of cash that the card can carry at any one time. Secured Credit Card - The Best Option For People With Bad Credit. A secured credit card is one of the best options for people who've failed to get the approval for a standard credit card. Your approval for credit is contingent upon a deposit in the credit card company's bank. Your initial credit limit is usually the amount of your deposit. As you make payments on time, the credit card company may increase your credit limit to 150% or 200% of your security deposit. Unlike a prepaid card, where you are actually spending your own money when you make a purchase, with a secured credit card you are buying on credit and reestablishing your credit history. The security deposit is only touched if you default on payments. Be sure to check around for the best interest rates, as they can vary widely. You will be faced with many options as you are trying to rebuild your credit history, and unfortunately, many people have found ways to take advantage of those people who are tying to turn over a new credit "leaf." Don't let that happen to you! Thoroughly research each of your options before making a decision. What Are The Benefits Of Gas Station and Department Store Credit Cards? If you are trying to rebuild your credit, gas station and department store credit cards just may be the answer that you're looking for. Why? Unlike bank issued credit cards, these types of cards are generally easier to get, so even if your credit report isn't spotless, you may be approved for one of them. But it's important to remember to use them for the purpose of rebuilding your credit report, or you could quickly find yourself in debt again. (After all, those department stores filled with everything imaginable are pretty tempting, aren't they?) After you've been approved for a card, you should make every effort to pay off the balance in full each and every month. Because they typically have higher interest rates, letting a balance accumulate can cost you a lot of money! Obviously, you should pay on time, and never, ever allow a payment to be late. If you think that you've waited too long on a department store credit card, simply go to the store and pay your bill in the customer service department. Another thing to remember is that just because these cards are easier to get, that doesn't mean that you should have tons of them! When a potential lender looks on your credit report and sees a lot of credit already extended-even if it's just one of these cards-they will likely pass on your request. Once you have used the cards to build a good credit history, you'll have to decide whether or not to keep them. After all, the interest rates are significantly higher than bank issued credit cards, and if your credit rating is good enough to get one, you might be better off canceling them and using a master card or visa instead. Here are some things to consider when applying for one of these cards: Most people think of gas station credit cards as only good for purchasing gas, but in fact, you'll reap other benefits as well. For example, what would happen if your car broke down, but you didn't have the cash to get it fixed? If you had a gas station credit card, you could simply charge the amount of the repair to your card! In addition, when traveling you could use the card to eat out (most gas stations in remote areas have restaurants), or simply use it to buy snacks, suntan lotion or whatever else you need. Finally, you may be able to get discounts on travel, hotels or rental cars, and car insurance when using your gas station credit card. The key is to shop around for just the right card that will offer you the most benefits. A department store credit card can offer great benefits as well. Just imagine everything that a department store offers; appliances, rugs, furniture, clothes, jewelry, tool and cosmetics, to name just a few. But remember not to get too carried away-after all the point is to build your credit, not go further in debt, remember? Again the bad thing about these types of credit cards is that the interest rate you pay will be higher than a bank issued card. But if you watch your charges, and then pay them off every month, this shouldn't be an issue. Michael Contaro
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