The problems with credit cards for bad credit history

Advertising Disclosure

Credit-Land.com is an independent, advertising-supported web site. Credit-Land.com receives compensation from many credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. Credit-Land.com has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » Research » Guides » Building Credit History » The problems with credit cards for bad credit history

The problems with credit cards for bad credit history


Updated: December 26, 2012

By
Add to Favorites:
Those who have had a bad credit history often find it hard to get credit. A bad credit history reflects poorly on the creditworthiness of an individual. A lower credit rating or FICO credit score means that the better credit cards and reward programs are not offered to such customers. There are, however some credit card issuers and some specific credit cards that are offered to the customers who are having a bad credit history. These credit cards are the only option for such customers in trying to rebuild their credit scores. However, there are quite a few problems that such credit cards bring as well. Customers have to be careful about these credit cards as they can get them into further trouble. High interest rates High interest rates are the biggest problem of credit cards for bad credit history. The APR on these credit cards is quite high, reaching as much as over 25%, to justify the risk in lending to credit card customers with bad credit history. From the customer`s perspective, this could mean a lot of interest. If the outstanding balance is 1000 dollars, and you don`t do anything to pay it off, you will add another 250 dollars by the end of the year even if the minimum payment is being met. These high interest rates keep increasing the outstanding balance. Hidden charges Credit cards for customers with a bad credit history are known for charging hidden charges. These could be of all types. Late fee is now restricted by credit card laws, although that could still keep adding up to the balance. There are various other types of fees, these includes; application at the initial application and inactivity fee for non-use, all of which reduces the available credit the customers. These hidden charges are something that cannot be negotiated, and credit cards for bad credit, are known for sneaky charges. No rewards A lot of people make purchases on their credit cards in order to gain rewards which are usually not available for people with bad credit. Building ones credit history is the only benefit that is offered, but customers, have no real incentive to spend while using these credit cards. The lack of rewards literally means you could spend with cash rather than taking the risk of paying an interest over and above the charges you pay. Fees Annual fee could be quite high on some credit cards which could add on to the outstanding balance. For those trying to use credit cards for bettering their credit history, the annual fee reduces the credit available to them. This adversely affects the credit history because of the lowering gap between debt and credit limit. There is a finance charge for keeping balance beyond the grace period available for payment. There is cash advance fee which could be high if customers use cards to withdraw cash.

Add to Favorites:
Get the latest news, articles and expert advice delivered to your inbox. It's FREE.

Related Research:

5 Reasons to Get the Capital One Venture Miles Rewards Card

5 Reasons to Get the Capital One Venture Miles Rewards Card

By Herbert Moore, Posted: January 18, 2017

If you’re looking for a great travel rewards credit card—one that offers unlimited earning opportunities, flexible redemption, and lots of perks—look no further. This card from Capital One has you covered. Continue reading
Credit Card Tips For Holiday Shopping 2016

Credit Card Tips For Holiday Shopping 2016

By Herbert Moore, Posted: November 23, 2016

November and December are the busiest months as gift shopping reaches its peak. People rush around looking for the best gifts and the best deals leaving a lot of money in the shops. Holiday season may force you to go over the household ... Continue reading
Credit Cards to Save More on Holiday Shopping

Credit Cards to Save More on Holiday Shopping

By Herbert Moore, Posted: November 22, 2016

Discounts and special offers are available all year round. Werther you are a bargain hunter or an impulse buyer, make sure you check online discounts and special offers. Also, if you are a cardholder, see if your credit card opens the door ... Continue reading