Giving credit to the credit challenged

While some people call it, “bad credit,” I prefer the kinder, gentler term, “credit challenged”.  I feel it’s somewhat politically incorrect to label those with scores dipping off the credit bureaus charts with such a negative connotation. What’s truly “bad”, however, are the companies who take advantage of the credit struggling folk out there.  Yes, somehow, some way, we’ve dropped the credit ball. That much is true. But still I feel rather protective of those in the ranks.

In light of this, I’d like to continue my series on credit cards for the credit challenged.

Personally, I own an unsecured card for poor credit, such as I am relating today. I have a First Premier Mastercard, in fact.

Do these unsecured cards take advantage of debtors? The simple answer to that is, “No.” You don’t have to own one. But if you do, be sure to pay attention to fees. Otherwise, you’ll feel taken advantage of. (And feelings, as my therapist reminds me, are our reality)

There are numerous unsecured cards for “bad credit”.

Here’s how they work:

You apply via internet application. The card arrives within a short time in the mail. Characteristically, even the nearly terrible debtor can get one. There is usually rejoicing and hallelujahs on the part of the debtor, over being trusted with a credit card by a financial institution. (OMG! Someone actually gave me credit!)

The card costs a onetime “startup fee” of $150.00- $175.00 just to activate it. Bad credit cards typically carry a $300.00 line of available initial credit. Via activation you’ve eaten up half or more of the card’s credit line. That is just where the fun starts. READ the fine print to discover how to make payments. These cards will insert a reason to charge you for just about anything. Most will even charge you to make payments. Read that part of your agreement carefully. I’ve been dinged with seven dollar fees for calling to make a payment, paying with a check, etc. Once, I am sure, I was charged for wearing the wrong color when I made a payment, because I got fined but never came up with another reason. (First Premier took that unknown charge off my bill, btw).

Other fees to watch for:

• late fees( of course)
• overlimit fees (which can happen when maximum balance + finance charge + late payment intersect)

Why do I have one of these costly items? I travel a significant amount of time for work. It’s nearly impossible to rent a car without a traditional credit card.  Likewise, hotel rooms will often place a temporary hold on your account if you use a debit card. I’ve had these holds lock up over $300.00 of my “real” cash in the bank for up to thirty days. Not having a few hundred dollars when you depend on it is painful.  Having a credit card in my situation is not only desired, it’s required.  

Clearly you may have your own reasons for wanting an unsecured card.

If you opt for obtaining one, here are some suggestions:

1. Plan on high fees to activate. Read policies. Once you activate the card, pay it off in full. Immediately. Having a credit card that’s nearly full dings your credit bureau report.
2. Read the information on how to make a payment without fees. You don’t want to spend $100.00 a year (or more) just to make payments, do you?
3. Review company information for complete understanding of late fees, interest, time frame payments take to apply, (yes, I got stuck once on that too, when a payment didn’t post till after the due date, and sent me into overlimit fees)
4. Pay the card off in full each month.

To summarize, these “bad credit” unsecured card companies take a risk lending you credit. And they offset some of that risk by charging you upfront and in many and various ways. You can offset that cost by being aware of fees and paying off the activation fee in full, along with new purchases in full every month. You won’t feel taken advantage of and your credit rating will not take a ding.