Some individuals have a bad credit history for various reasons. Credit bureaus generally keep track of all the credit related transactions of a person. Therefore the consistency with which an individual pays his or her bills, the number of times one applies for loans or credit cards, etc. are all monitored by the credit bureaus.
Every time you apply for a new bank loan or credit card, the lender requests the bureaus for your credit score which is generated based on your credit history. If your score is below average, then you would find it hard to get credit from companies, as you represent a high risk profile. However, there are lenders and credit card issuers who provide credit to such individuals. These credit cards meant for individuals with bad credit have a lower credit limit or a higher interest rate. However, they provide some benefits as well.
Only chance to improve your credit history
If your credit history is bad and you are not receiving credit from reputed card issuers then bad credit, credit cards will help you get your credit rating back on track. Credit score can be improved through greater consistency in paying bills over a period of time and by reducing the amount of debt that you have. If you don’t have a credit card at all, then your transactions cannot be tracked by credit bureaus any more. As a result, your lines of credit will completely dry up.
You can always upgrade to better card terms
If you are not able to get approval for regular credit cards, you can always go for secured credit cards
. These are credit cards, where you have to pay an initial security deposit in your account. The lender can claim this deposit if you fail to pay the card debt on time. However, if you consistently make your bill payments over a period of time, you can upgrade or request the card issuer to sanction an unsecured credit card, instead of a secured one. So, bad credit, credit cards sometimes help you start the whole process of credit history recovery which is imperative for various reasons.
Balance transfers help you save money
Some credit card customers are offered an opportunity to transfer their balance to another card, with a lower introductory interest rate during the promotional period. This is the time when you are charged very low or no interest rate on your debt. As a result all your payments can be directed towards repaying of the debt that you have incurred. If your existing credit card charges you an excessive interest rate on your debt, then balance transfer to a lower interest rate credit card, will be a good way to focus on repaying off the debt. It will also provide motivation to organize your finances so that you can get rid of your debt in time. Transferring your balance to another card will also allow you to increase your credit limit without increasing the debt, thereby increasing your credit rating which depends on credit utilization ratio.