Refrain from using credit cards badly to cause a bad credit history

A bad credit history signifies that a customer is not completely creditworthy. However, the recent economic crisis has pushed a lot of individuals into that zone with low credit scores. The bad credit history could be because of various reasons. It could be because of the customer defaulting on a loan or mortgage. It could be because of the customer accumulating large debts that constantly accruing interests. It could be because of the customer repeatedly missing his or her payments. There are some creditors who are still willing to provide credit cards to individuals with a bad credit history. Here are some of the features of such credit cards.

The interest rate rises with the risk factor associated with a customer. The APR could be as high as 25% or 30% in certain cases. This comes as a major handicap for the card holder. For 25% interest, if the customer has an outstanding balance of only 100 dollars, the debt could still increase to 125 dollars in a year’s time. Similarly, a debt of 1000 dollars would grow to 1250 dollars. So card holders need to be totally careful to avoid having large expenses. They must try to pay off the outstanding balance completely.

Credit lending standards have tightened drastically in recent times, and customers with bad credit history get fewer credit borrowing opportunities. In fact, in some cases, the credit limit is as low as a few hundred dollars, half of which is used up by the initial fee and other types of hidden charges, not leaving much for the card holder anyway.

Rewards credit cards are usually not given to people, who have bad credit history. These cards yield high interests, paid by card holders and various types of hidden charges and fees.

If the individual’s credit history is very bad, an initial security deposit might be required. The customer has to deposit a certain amount in the bank, and when the card expenses exceed that limit then the customers have to repay the debt to be able to use the card again. Such cards are also known as secured cards.

There are many different types of hidden charges usually associated with bad credit, credit cards. This could include the obvious annual fees, late fees and the overdraft fees. Other types of fees could include cash advance fee, insufficient funds fee and finance charges.

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.