Getting a Credit Card with a Bad Credit Rating
Paying with plastic has become a common part of everyday life, with more people now using credit or debit cards than cash for day to day purchases. The rapid rise of online shopping means that it's almost essential to have some way of paying by card, but people with poor credit ratings have always struggled to get approved for credit cards. It's not impossible though, and there are ways for people with even the most impaired credit histories to enjoy the convenience of plastic. People with mild credit problems or low incomes will probably not be approved for the most heavily advertised credit cards with the most attractive offers, but many companies operate a policy known as Risk Based Pricing. This basically means that their cards will offer a different interest rate depending on the credit score of the applicant. If your credit rating isn't good enough to be accepted for the card you apply for, you may be offered a different card with similar features but a higher interest rate.
Risk based pricing is a great way for people with some adverse credit history to get a card, but people with more severe problems will need to look elsewhere. Several companies offer a card specifically aimed at people with poor or no credit hostory, and market them as a 'first' or 'starter' card. The idea is to offer a card with a low credit limit and a comparatively high interest rate, as a way of allowing people to being to develop some positive history on their files. While these cards are poor value in comparison to more mainstream offers, the acceptance rate is very high and by opening an account and keeping up with your repayments, your credit rating will slowly be improved to the point where you may be able to apply for a cheaper card further down the line. People with more severe credit problems such as bad debt or a previous bankruptcy may find that even these starter cards are out of their reach, which leaves only one real option : prepaid cards.
These cards, also known as secured cards, are not in fact credit cards at all as they need to be 'loaded' with funds before you can use them to spend. After you've credited money to your account, the card can be used like any other Mastercard or Visa, with the important difference that you can only spend money that you have in your account - you can't build up a debt. This means that there is very little risk for the card issuer, and so acceptance is virtually guaranteed. The flipside is that the issuer doesn't earn money by charging interest on your balance, and so they instead impose a variety of different charges on the cardholder ranging from a small percentage of everything you spend using the card to a monthly or yearly administration fee. You may also be charged a considerable sum for even applying for the card, so shop around and check the small print carefully before signing up. To sum up, no one would deny that a bad credit rating makes it harder to get a credit card or other plastic payment solution, but with a little searching, there are cards of some kind available for nearly everyone.
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