Credit card companies generally keep a tab on an individual’s as well as a company’s credit history or in other words the credit scores. This would include the payment patterns, the willingness to pay as well as timely payments etc. This information in turn is passed on to credit bureaus for future reference.
Bad credit and good credit card offers do not go hand-in-hand. Bad credit attracts higher rates. There are at least three major drawbacks or disadvantages of having bad credit. They are listed below:
1. High annual fee – bad credit cards are very high on the risk factors and they are pretty risky investments for card issuers. But since the consumers with bad credit also require credit cards, these companies do offer them the card but with exorbitant fee structures. After all the risk the card companies take, it is but natural that the additional costs due to the high risk involved would be passed on to the customer. These cards help one build their credit history and is ideal for individuals or companies with bad credit. The fee can range anywhere between $70 and go up to several hundreds of dollars each year based on the situation of the applicant. Bad credit cards never come with zero annual fees.
2. High Annual Percentage Rates (APR’s) – The APR’s on the bad credit cards are usually very high. However, they could be lowered in case the applicant provides a collateral or a good bank account which could be linked to the card in order to make it secure. When the collateral provided is insufficient then the card becomes unsecured as the risks are high. This in turn would result in high APR’s as well as lowering of the credit limits.
3. High advance fees – This is the bitter truth someone with bad credit has to face. Some card companies could be exploitative and will fleece the applicant with bad credit. A fee is charged to even glance at the application and there is no guarantee that the applicant would get an approval to get a card. The fee could be charged well in advance or later. But either ways there is no escaping the fee.
In all, having a bad credit has many more disadvantages than one would imagine. Added to that is the painstaking effort that one has to put in to perk up the credit scores. It would be far more sensible to keep a good credit rating than a bad one.