Introduction To Sub-prime Credit Cards
There are many people out there who may have in recent times suffered significant financial setbacks due to the credit crunch and recession. This may not only have caused problems with living costs but may also have had an impact on many people's credit scores.
The good news is that even for those whose credit score has suffered there may be a way to access some level of credit to help through these tough times.
If you have been with a bank for a very long time then it is possible that they may offer you a credit card if you have managed your bank account well. Many people with a bad credit score may however have had problems with their banking in the past, so this may not be an option for everyone. Another solution which may be suitable for many is a sub-prime credit card.
Sub-prime credit cards offer a solution to anyone who has bad credit and is unable to secure a conventional credit card. Sub-prime lending is a type of credit which is offered to anyone who has a poor credit record but not so bad that no-one will risk lending to you.
There are however several downsides which may be associated with sub-prime credit cards. Firstly, the credit limit is likely to be very low. This is because companies are generally unwilling to risk lending large amounts to people with a poor record of paying money back. If you manage your account well though, this may be gradually increased over time.
Secondly, the interest rate associated with sub-prime credit cards is likely to be far higher than on an ordinary credit card. This is partially to encourage prompt repayment and partially because the credit card companies need a higher rate of return to make it worthwhile lending to a possibly risk customer.
Finally, most sub-prime credit cards also charge an annual fee, with many also having additional charges including monthly fees, set-up fees and transaction fees.
Despite these downsides, a sub-prime card may be a good option on a short-term basis to help you to rebuild your credit as if you manage your account well this will show on your credit report. If you have the slightest doubt over whether you would be eligible for an ordinary credit card you may want to consider a sub-prime card.
Each attempt to apply for an ordinary card will be marked on your credit record and this may actually further lower your overall credit score. Applying for a sub-prime card in this instance may be a better option, until you are sure you have built your credit score back up to a good enough level to secure a more economical card.
The good news is that even for those whose credit score has suffered there may be a way to access some level of credit to help through these tough times.
If you have been with a bank for a very long time then it is possible that they may offer you a credit card if you have managed your bank account well. Many people with a bad credit score may however have had problems with their banking in the past, so this may not be an option for everyone. Another solution which may be suitable for many is a sub-prime credit card.
Sub-prime credit cards offer a solution to anyone who has bad credit and is unable to secure a conventional credit card. Sub-prime lending is a type of credit which is offered to anyone who has a poor credit record but not so bad that no-one will risk lending to you.
There are however several downsides which may be associated with sub-prime credit cards. Firstly, the credit limit is likely to be very low. This is because companies are generally unwilling to risk lending large amounts to people with a poor record of paying money back. If you manage your account well though, this may be gradually increased over time.
Secondly, the interest rate associated with sub-prime credit cards is likely to be far higher than on an ordinary credit card. This is partially to encourage prompt repayment and partially because the credit card companies need a higher rate of return to make it worthwhile lending to a possibly risk customer.
Finally, most sub-prime credit cards also charge an annual fee, with many also having additional charges including monthly fees, set-up fees and transaction fees.
Despite these downsides, a sub-prime card may be a good option on a short-term basis to help you to rebuild your credit as if you manage your account well this will show on your credit report. If you have the slightest doubt over whether you would be eligible for an ordinary credit card you may want to consider a sub-prime card.
Each attempt to apply for an ordinary card will be marked on your credit record and this may actually further lower your overall credit score. Applying for a sub-prime card in this instance may be a better option, until you are sure you have built your credit score back up to a good enough level to secure a more economical card.
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