The secret is to apply for a "secured" credit card. The best part is that it looks the same as any other credit card. You can use it for buying online or over the phone, making hotel reservations, paying for gas at the pump, anything you'd use a regular card for. Nobody can tell it's any different.
I used to have one of these and it was really handy. You don't realize how often you need a credit card till you don't have one.
A secured credit card works just like a credit card too, not a debit card. You can either pay the minimum each month and carry a balance, or pay it off in full.
When you apply for a secured credit card, you won't be turned down for having bad credit. There's a catch, though. But it's not too bad, and it's only temporary.
You need to deposit about $300 to $500 in a savings account with whoever issues your card. If you don't pay, they take the payment out of the savings account, so that's why they don't worry about your credit. They'll put a limit on what you can charge, that's usually a percentage of the amount in your savings account or might be the same amount.
Watch Out for High Fees
The main drawback with secured credit cards is the high fees, but with a little shopping around, you can find some that don't charge all that much. You shouldn't have to pay to apply for one, and if you look hard enough, you might be able to find one with little or no monthly or annual fees. Watch out for hidden charges, like having to pay a fee when you're given a credit line increase. You'll probably always have a fee for going over the limit or paying late, but you're not going to do that, so that doesn't matter. Right?
The point of having this kind of card isn't really to run up a big balance, because there's no reason to pay interest when you could just withdraw the money from the saving account and pay all at once. What these cards are really good for are two things: convenience, and building your credit back up. So shopping for a card with a low interest rate isn't as important as looking for one with other fees that are low. If the card gives you a grace period, where you aren't charged any interest at all if you pay the balance off each month, that's good.
Something else that's important to find out, is whether the card reports to the three credit agencies, Experian, Equifax and TransUnion. You want one that does, because the more on-time payments which are reported to them, the better your credit will be.
Another benefit is if the card will allow you to switch to a regular, unsecured credit card after a year or so of on-time payments.
Where to Find Secured Credit Cards
Your local credit union or bank may offer them. Try asking to apply for a "secured credit card." Or search online and you'll find lots of them that are easy to compare with one another, so you can look for the lowest fees and the best terms, but of course be careful to watch out for scams also.
When You Get One
When you get a secured credit card, use it for convenience and to build up your credit. Charge small amounts and then pay it off each month. Honestly, these credit cards aren't really the best substitute for a loan, because you're limited by the amount of money you already have in the bank. If you've got bad credit and need an actual loan, there are other choices. For example, check out this post, even if you're not unemployed.
Back before I got one of these, I was just out of high school and bought a car for $200 to drive to work. Not as great a bargain as you might think. It broke down and needed about $400 in parts almost immediately, which I charged on my brand new credit card. You can guess where this is going: Even after fixing it up, it broke down again, about the time I got laid off because I was the new employee. So I just walked away, literally, and a little later when I had a steady job, the credit card companies weren't so happy to give me credit again. A secured credit card did the trick, and I soon moved up to a regular card. I also moved to where I could walk to work.
9:41 p.m. February 24
what a ripoff. If I had $500,, I wouldn need a cc.
10:33 p.m. February 24
Well, yeah. Like I said, secured credit cards are more to make it easy to pay for things where you can't pay cash, like online, and for building up credit again. If you need a loan, they help for the short-term because you can pay the minimum one month and then pay it off the next, but there's really no way around putting that money up front.
9:41 a.m. February 25
Sell something on eBay. Raise the money, then get a card.
11:01 a.m. February 25
Is there any way to get a regular credit card with bad credit?
1:21 p.m. February 25
If you've been turned down by the Visa/MC people, try a store card. They're sometimes more lenient.
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