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Best confidence card rewards program
If you’ve ever had credit problems, then you’ve doubtless received offers for credit cards aimed at people with terrible credit. These offers range from legitimate to questionable to outright scams. How can you tell the difference?
The answer is to read the fine print, usually to be found in a document called “Terms and Conditions.” To show you the difference between “the excellent, the terrible, and the hideous” in the low-end confidence card promote, let’s take a look at the fine print associated with such offers.
We’ll start with one of the more well loved low-limit “starter” cards available today. These are actual terms in print by a major companionship at the time this article was written. The card comes with a Visa logo on it and looks like a regular confidence card, so you can use it as an extra piece of identification when you’re booking a hotel room, renting a car, and so on.
In the “Terms and Conditions” document, the first thing we see is the annual percentage rate (APR), listed as 19.5%. That’s not a particularly attractive rate, but it’s not as high as a lot of other cards. A small farther down, we see that the APR for cash advances is higher, 25.5%, which is normal since here is greater risk involved to the companionship.
Where it really gets fascinating is the section that lists the fees associated with the card. In this example, here is an annual fee of $150! Here is also a $29 fee to open the account, as well as a monthly “maintenance” fee of $6.50. Whew! That’s a lot of fees. But wait! It gets better.
Toward the bottom of the document, buried in the fine print, we see something called “Available Credit Limitations.” In 8-point typeface (very tough to read on a notebook cover or printed page), you are informed that your generous initial credit limit will be a whopping $300. On your very first statement, you will be allocated for the $150 annual fee, plus the $29 setup fee. The $6.50 monthly fees will start appearing after you make your first buy on the card.
Let’s take a closer look at the math here. It will cost you $179 up front, plus $78 per year, to obtain $300 worth of credit. Your total cost for the first year is $257, assuming you pay off the balance each month and don’t incur any regular interest charges. Sound like a excellent deal? Does it make any sense at all to pay $257 to obtain $300 worth of credit? That’s 85.6% in effective interest! If you keep a running balance of $300 on the card, and just make the minimum payments every month, your effective interest rate will be 105.2% for the first year, and 95.5% for subsequent years. That’s some sweet expensive credit! This confidence card offer, while legal, subdue counts as a total rip-off.
As terrible as the above sounds, it subdue only qualifies as “questionable” rather than being a full-on scam. Here are much worse offers floating around out here. I’ve even seen some “deals” where the fees are so stiff you start out above the credit limit before receiving the card in the mail! In the bogus category I’d also include cards where you are forced to pay an advance fee prior to receiving the “guaranteed” confidence card, which of course never arrives. Here are also “catalog cards,” where you supposedly build credit by purchasing items through a card tied to one particular companionship and their catalog of goods. The problem is that the catalogs usually consist of grossly overpriced junk.
So what constitutes a excellent confidence card offer for someone who’s experienced serious credit problems and wants to take action toward rebuilding his or her credit? At the risk of annoying the huge confidence card marketing companies who target the “sub-prime” promote (consumers with terrible credit histories), my advice is to completely avoid any offer that comes to you unsolicited. Instead, do the research on your own.
Check out www.bankrate.com for current offers by legitimate confidence card companies. Shop and compare before you apply. Remember, the APR is only one aspect of your choice, and not necessarily the most vital. What you want to look at very carefully are the annual fees, setup fees, and monthly fees.
It’s vital to realize that you may not be able to obtain an unsecured confidence card when you’re just starting to rebuild your credit. Instead of paying $257 to obtain $300 in credit, you’d be far better off placing $250 as a deposit toward a excellent SECURED confidence card from a reputable major bank. In this real-world example, the annual fee is only $29, the APR is 19.99%, and here are no setup fees or monthly maintenance charges. Your $250 deposit will net you $250 worth of credit (less the $29 annual fee), and you’ll build clear credit history just as quickly as with the ridiculously expensive offer discussed above. Plus that original $250 deposit is subdue YOUR money. After you’ve been granted unsecured credit again, and you’ve paid off any outstanding balance on the secured card, you can get your deposit back.
One final tip: If you have the opportunity to join a credit union, you should consider checking out their offers for low-limit unsecured and secured credit cards. Credit unions frequently offer much better terms than regular commercial banks. Through credit unions, you can often find credit cards with no annual fees, lower interest rates, and more flexibility.
Be sure, but, to authenticate that the credit union reports account activity to the credit bureaus. Otherwise, your clear payment history on the new confidence card won’t lift your credit score. And remember, no matter what card offer you’re considering, be sure to read that fine print!