Bad credit cards are cards commonly meant for borrowers with poor credit histories, low credit scores, and past bankruptcies. A person with no credit history may also encounter difficulty getting a credit card and need a card for those with bad credit to start building a credit history.
Because of the increased risk, the creditor takes, bad credit cards might have additional fees, higher interest rates, and lower credit limits when compared to credit cards for those with good credit. Credit cards for applicants with bad credit may have interest rates of over 30 percent, yearly account maintenance fees, and other expenses or restrictions. Applicants should read poor credit card terms carefully before opening an account to avoid surprises later.
Credit card application processes for bad credit history cards vary. Some card providers don’t require a credit history check at all. Other issuers require the applicant make a deposit to open the account. These cards are secured credit cards. The borrower deposits a set amount of money into the account, and the amount determines the available credit line. For example, a borrower with a secured credit card line of £200 must deposit £200 of her own money into a special account held by the creditor. A card may be partially secured, meaning the borrower deposits a set amount of pounds into the account but receives a credit line that is slightly higher than the amount she deposited. In either case, the creditor reserves the right to take money from the deposit if she fails to make the credit card payments on time.
Bad credit cards help borrowers improve credit histories if payments are made on time. Most poor credit card issuers report the payments to the borrower’s credit history, allowing her to establish new credit and add a positive entry to her report.