How to Get a Credit Card with Bad Credit

Like cigarettes in the 1950s and 60s, Americans today are addicted to credit cards.  That little piece of plastic that started out as a status symbol for the few has become a necessity for all of us. Your credit card is the answer when you need “24 hour gas”, or a “recent movie on DVD” or that online purchase, or even some emergency cash.  In fact, you probably can’t even cash a check without showing “a major credit card”.

But when times are tough and you don’t have a credit card, what are you to do?

Well, you have four options:

1. Apply for a credit card.  Yes, that’s right… try to get one anyway.  If you haven’t already been turned down, go ahead and apply for a card.  A surprising number of consumers assume that they don’t qualify… you might be pleasantly surprised.  (Just one word of warning… if you do get a card, use it with caution… many folks have found that a credit card is a one-way ticket to financial disaster.)

If you do NOT qualify for a traditional bankcard, you still have some options….

2. “Bad Credit” Credit Cards – There are numerous companies that offer credit cards to folks with lower credit scores.  But use caution here… this is not FREE money!  These companies often charge sizable “up front” fees.  And even the loan shark behind the Pool Hall won’t charge the interest rates that some of these companies demand.  Interest rates on most credit cards are “compound interest”… that means that you will be paying interest on the borrowed amount AND on any unpaid interest.  At these rates, it is likely that your monthly balance will increase, even if you make the monthly minimum payment.   One minor piece of good news is that if you have and pay this card in a timely manner, it might help improve your credit history and credit score.

3. Pre-paid Cards – A better alternative is the “pre-paid” credit card.  Usually, you buy these cards with a one-time fee and then pre-pay a balance on the card.  When the pre-paid balance is used up, you go somewhere and pre-pay an additional balance (re-fill the card) and so on.  The Good News is that, since the money you spend is your money, you pay no interest fees.  This card has three slight disadvantages:

• It is inconvenient to periodically return somewhere to “re-fill” the card,
• This card will not have any positive impact on your credit history or credit score, and
• If you don’t have money to “re-fill” the card, then it’s useless to you.

4. Debit Cards – Many Americans are trying to “kick the credit card habit” by using Debit Cards.  These cards are usually available, often Free, from your bank.  Like a check, they allow you to draw money directly from your account.  They combine the convenience of a credit card with the financial control of a prepaid card and, of course, you pay no fees or interest charges.  However, like the pre-paid credit card, the debit card:

• Will not have any positive impact on your credit history or credit score, and
• If you don’t have money in your bank account, then the card is useless to you.

In today’s world, credit cards have almost become a necessity of life.  Fortunately, even if you have credit problems, there are “plastic” alternatives that will meet your financial needs.