Credit Card Options For People With Bad Credit

There are many items that you can only pay for with a credit card. If you want to book a holiday on the Internet, a credit card is a secure way to pay. And if you want to hire a car when you get to your destination, a credit card is your only option.

This can make life difficult for those who have a poor credit history. In the past, people who have had arrears, defaults and County Court Judgements (CCJs) found it next to impossible to get a credit card. But now there are a couple of options which mean that almost anyone can have a credit card. They are secured credit cards and prepaid credit cards.

What Are Secured Credit Cards?

Secured credit cards have been big in the US for quite some time and it looks like they are about to become an integral part of the UK's financial scene. Secured credit cards look like regular credit cards and are available to people with a poor credit history, including discharged bankrupts. Undischarged bankrupts or people with a history of fraud do not qualify.

A secured credit card is backed by a security deposit paid by the card holder. As with other credit cards, applicants' details are checked with credit reference agencies, so it is useful for them to appear on the electoral roll. The annual percentage rate for this type of card tends to be high, usually around 30%. Repayments are also made at a higher level than unsecured credit cards, usually around 5% of the outstanding balance.

Secured credit cards can help to repair a poor credit history if they are repaid properly. This is because card providers report payment information to Experian and Equifax, the main credit reference agencies. Credit limits start at around £200 and may be as much as £2,500. As with other credit cards, good card management will result in a higher credit limit.

What About Prepaid Credit Cards?

Prepaid credit cards are a bit like debit cards, but with a credit card logo. They are not really credit cards and therefore do not require a credit check. To get a prepaid credit card, all people need is identification that proves their name and address. Consumers credit the card with a certain amount (up to £5,000 on some cards) and then are able to use the card like a normal credit card. There is no interest to pay.

Some card issuers charge a processing fee and make additional transaction charges for ATM withdrawals, adding money to the card and transferring the money to other accounts.

Prepaid cards will not get people into further debt. They are also a good option for regulating the spending of children or employees. In addition, prepaid cards are a good option for spending money while travelling without worrying about spending more than you have.

Secured credit cards and prepaid credit cards are two useful options to help people with bad credit manage their finances. It is important to look at the terms of individual cards to see which one suits you best.

More Information:

• Credit Building Tactics
  Much is written about credit ratings, the score against an individual’s name, that rates their eligibility for credit. This article discusses different methods that you can use to try and build a new, better credit rating.
• Credit Reports
  Every time a customer applies for a financial product such as a credit card, the credit company will consult that customer’s credit file. This file records all their financial activity in terms of credit applications and banking activity.
• Applying For Credit Cards When You Have Bad Credit
  For those with a poor credit score, getting a credit card is harder. However, there are solutions and we will discuss and offer these in the article.
• Using Your Credit Card To Build Credit History
  Let’s say you want to buy a house, but you need to get a mortgage to help pay for the house. However, you have no credit history to speak of, so how can you apply for the mortgage to get your dream home?
• Equifax UK & Experian UK are the two main credit reference agencies in the UK.