Credit scores are a big deal, and for good reason: low credit scores can make life hard, while high credit scores can open the doors to our dreams. In order to get a line of credit – any line of credit – some people take the first credit card offer that comes their way. Thrilled by the chance to have a credit card of their own, some customers don’t even bother to read the terms they are agreeing to.
Unscrupulous sub-prime card companies count on this. These companies take advantage of desperate folks by spelling out contract details in vague terms, down-playing changes to interest rates after a specified length of time, extending pitifully low credit limits, or charging exorbitant fees.
How can a person with no credit (or bad credit) protect themselves?
The first step to selecting a fair credit card offer is to read the fine print. Yes, all of it. Credit card offers grab our attention with huge print and colorful graphics promising zero interest and low annual percentage rates. Low credit? No problem. No credit? Fine. These companies are more than willing to overlook such details and issue cards to high-risk applicants.
But the truth is in the details. Toss aside those distracting envelopes and look for terms and conditions. Those promises on the packaging might have a shirt life span, after which the card holder is stuck with high rates and fees. Be aware that, if you have no credit history, or a flawed history, you can expect interest rates that range from eighteen to twenty-five percent, or higher.
If no good offers are forthcoming, potential card holders can go to their banks. It is often easier to get a credit card from a financial institution where one has had savings and checking accounts. Once you establish a reputation for keeping a positive bank balance over time, your bank might even approach you with a sweet credit card deal.
Those who are still unable to qualify for regular credit cards aren’t completely out of luck. Secured credit cards are a good choice for many people in this situation. These cards are secured by a deposit made by the card holder into an account that is set up specifically for this purpose. Then, if the card holder doesn’t make their payments, the card issuer can take the money they’re owed out of that account. Many banks and companies are more willing to issue secured cards, since their risk is decreased by doing so. Secured cards might or might not come with hefty annual fees.
Some low-credit card holders feel that they must settle for atrocious offers, like a $200 credit limit after paying $100 in up-front fees. If those atrocious terms were spelled out in writing, then card holder took themselves for a ride by signing up for the card in the first place. Sub-prime predators are a fact of life, but they would not offer ridiculous terms if people didn’t accept them.