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'Last resort' cards can provide a fresh start
By Melissa M. Ezarik • Bankrate.com
In order to do many mundane activities these days, a credit card is
almost a necessity.
Ever tried to open a bank account or rent a car, and the first
requirement is to hand over your credit card? Even friends planning
to share driving duties must flash their plastic to prove their credit
existence to many major car rental agencies.
Some people just prefer the practicality of not carrying cash around
all the time.
For still others, there's the peace of mind that comes from having
credit readily available in an emergency.
But for the credit destitute, plastic is hard to come by.
Not everyone has offers from credit lenders stuffed in their mailbox.
In fact, those with bad, little or no credit history may be yearning for
even a single offer -- any offer -- to arrive one day.
When it finally does -- or when you head out in search of credit -- the
"deals" can seem like anything but. First of all, high annual
percentage rates, to the tune of 18 percent, 20 percent, 22 percent
or more, are common on credit cards offered to those with poor
credit.
The 9.9 percent APR for a card geared toward getting your credit
"back on track" seems like a lucky break -- until the eye meets the
fees list you're likely to encounter.
Credit card fees:
• $29 for account setup
• $95 program fee
• $48 annual fee
• $72 participation fee
• $20 annual per-card fee for additional cards
• $25 fee for each approved credit limit increase
"Look at it from the bank's perspective," says Tracey Mills, a
spokeswoman for the American Bankers Association. "High risk
equals high cost. The riskier you are, the higher you'll pay for credit."
But if you're willing to pay, that piece of plastic can be yours. "You
can have pretty much the worst credit in the world and still get a
credit card these days," notes Richard M. Krawczyk, publisher of
The FinancialFitnessTips.com Report newsletter.
Credit cards are available even for those who have hit financial rock
bottom.
"One of the biggest surprises for consumers who've been through
bankruptcy is how easy it is afterwards to regain credit," says Gerri
Detweiler, author of "The Ultimate Credit Handbook: How to Cut Your
Debt and Have a Lifetime of Great Credit," now in its third edition.
Where to find them
If you don't receive any offers in the mail, or if the rates and terms
are unacceptable, there are many places you can search for the
best possible deal -- online, by phone or in person at your local bank
branch. Bankrate provides readers with interactive tools that enable
you to search for low interest rate cards, as well as no annual fee
cards; secured cards; student cards and rebate or frequent-flier
cards. There are many more online sites you can use to search for
your best possible deal.
"With more than 6,000 lenders out there, chances are most people
would qualify for some type of card," Mills says.
Lenders will extend a credit hand to nearly anyone, often hoping for
a long-term relationship. HSBC Bank Nevada is a good example.
Their Orchard Bank MasterCard Classic "is a bridge card that
enables customers who have less than perfect credit or no credit to
speed their movement along the credit spectrum," says HSBC
representative Rahsaan Johnson. "It gives us ... an opportunity to
reach the customer early in the process of building or rebuilding
their credit. So when they're ready for a car loan or a mortgage loan,
they have a history of working with us, and we hope that they will
continue to do so."
Credit boost for the future
Whether you stay with the bank or not, looking at the big picture of
rebuilding your credit is the right idea.
Living with what could be called a "credit card of last resort" is
definitely a "bummer," notes Maxine Sweet, vice president of public
education at the credit bureau Experian, who writes the online
consumer credit advice column Ask Max. "You know you shouldn't
be there. But it's also a great opportunity to turn yourself around.
You have a card now, you can manage it, and then you can move
on," she says.
A good credit history is the light at the end of the tunnel. So finding
the right tunnel is crucial.
Consumers who pose a high risk to lenders "are getting promotional
materials in the mail," says Emily Davidson, director of
communications at Credit.com. "But a lot of times it's not a good
deal."
Often, credit card issuers will buy mailing lists from credit bureaus,
asking specifically for those with credit scores in a certain range,
contends Krawczyk, who is also the author of "Financial Aerobics:
How to Get Your Finances Into Shape" and the home study course
"Financial Aerobics: 30 Days to Financial Fitness." Those with
marginal credit will most often get offers for secured cards,
requiring a deposit equal to or more than the total amount of credit
desired. "And then they still charge an arm and a leg on top of that,"
he adds.
Experts say the best bet is to research, research and research.
Offers found online -- through basic searches such as "bad credit"
and "compare credit cards," for example -- won't be touting their
high interest rates and fees or low credit limits. But they "seem
pretty straightforward about what the requirements are," says
George Yacik, vice president of SMR Research Corp., which has
conducted studies on the U.S. credit card industry.
While specific offers change often, here are a few lenders that have
issued unsecured credit cards to consumers with poor or little
credit:
Unsecured credit card issuers
• Columbus Bank and Trust
• First Premier Bank
• HSBC Bank of Nevada
Research may even reveal a card that offers rewards for purchases
or online bill payment options, which have traditionally only been
offered to those with decent credit but are becoming a bit of a trend
at the lower end of the market, Davidson says.
Reading carefully
With any offer uncovered, just heed the fine print (which Mills says is
more like "unread print"). One of those terms, for example, may
state the issuer's right to raise the interest rate if the customer is
even one day late on one payment, Krawczyk says.
The terms of any credit offer must be disclosed. "If you have less
than perfect credit, it's even more important to read those
disclosures carefully," says Detweiler.
What you find in the fine print of many offers can make your
neighborhood bank seem like the most desirable lender. "Everyone
focuses on the major card issuers. But if you're just starting out and
you already have a relationship with a bank, with a checking or
savings account, ask about their credit products," Mills says.
The big lenders, which have set rules and policies, know only what's
on your credit report. A local bank may be able to see a more
favorable side to your money handling, such as your avoiding
overdrafts and using electronic payment options successfully.
"Carefully select who and what you trust," advises Adam K. Levin,
president and CEO of Credit.com, who is also the former consumer
affairs director for the state of New Jersey. And never
underestimate how quickly you can use the system to build a
positive credit score. "If you play your cards right, it's really easy to
have good credit," he says. "Although it gets kind of demonized, the
system really is working in the consumer's favor a lot of times."
Melissa Ezarik is a Connecticut-based freelance writer.
By Melissa M. Ezarik • Bankrate.com
In order to do many mundane activities these days, a credit card is
almost a necessity.
Ever tried to open a bank account or rent a car, and the first
requirement is to hand over your credit card? Even friends planning
to share driving duties must flash their plastic to prove their credit
existence to many major car rental agencies.
Some people just prefer the practicality of not carrying cash around
all the time.
For still others, there's the peace of mind that comes from having
credit readily available in an emergency.
But for the credit destitute, plastic is hard to come by.
Not everyone has offers from credit lenders stuffed in their mailbox.
In fact, those with bad, little or no credit history may be yearning for
even a single offer -- any offer -- to arrive one day.
When it finally does -- or when you head out in search of credit -- the
"deals" can seem like anything but. First of all, high annual
percentage rates, to the tune of 18 percent, 20 percent, 22 percent
or more, are common on credit cards offered to those with poor
credit.
The 9.9 percent APR for a card geared toward getting your credit
"back on track" seems like a lucky break -- until the eye meets the
fees list you're likely to encounter.
Credit card fees:
• $29 for account setup
• $95 program fee
• $48 annual fee
• $72 participation fee
• $20 annual per-card fee for additional cards
• $25 fee for each approved credit limit increase
"Look at it from the bank's perspective," says Tracey Mills, a
spokeswoman for the American Bankers Association. "High risk
equals high cost. The riskier you are, the higher you'll pay for credit."
But if you're willing to pay, that piece of plastic can be yours. "You
can have pretty much the worst credit in the world and still get a
credit card these days," notes Richard M. Krawczyk, publisher of
The FinancialFitnessTips.com Report newsletter.
Credit cards are available even for those who have hit financial rock
bottom.
"One of the biggest surprises for consumers who've been through
bankruptcy is how easy it is afterwards to regain credit," says Gerri
Detweiler, author of "The Ultimate Credit Handbook: How to Cut Your
Debt and Have a Lifetime of Great Credit," now in its third edition.
Where to find them
If you don't receive any offers in the mail, or if the rates and terms
are unacceptable, there are many places you can search for the
best possible deal -- online, by phone or in person at your local bank
branch. Bankrate provides readers with interactive tools that enable
you to search for low interest rate cards, as well as no annual fee
cards; secured cards; student cards and rebate or frequent-flier
cards. There are many more online sites you can use to search for
your best possible deal.
"With more than 6,000 lenders out there, chances are most people
would qualify for some type of card," Mills says.
Lenders will extend a credit hand to nearly anyone, often hoping for
a long-term relationship. HSBC Bank Nevada is a good example.
Their Orchard Bank MasterCard Classic "is a bridge card that
enables customers who have less than perfect credit or no credit to
speed their movement along the credit spectrum," says HSBC
representative Rahsaan Johnson. "It gives us ... an opportunity to
reach the customer early in the process of building or rebuilding
their credit. So when they're ready for a car loan or a mortgage loan,
they have a history of working with us, and we hope that they will
continue to do so."
Credit boost for the future
Whether you stay with the bank or not, looking at the big picture of
rebuilding your credit is the right idea.
Living with what could be called a "credit card of last resort" is
definitely a "bummer," notes Maxine Sweet, vice president of public
education at the credit bureau Experian, who writes the online
consumer credit advice column Ask Max. "You know you shouldn't
be there. But it's also a great opportunity to turn yourself around.
You have a card now, you can manage it, and then you can move
on," she says.
A good credit history is the light at the end of the tunnel. So finding
the right tunnel is crucial.
Consumers who pose a high risk to lenders "are getting promotional
materials in the mail," says Emily Davidson, director of
communications at Credit.com. "But a lot of times it's not a good
deal."
Often, credit card issuers will buy mailing lists from credit bureaus,
asking specifically for those with credit scores in a certain range,
contends Krawczyk, who is also the author of "Financial Aerobics:
How to Get Your Finances Into Shape" and the home study course
"Financial Aerobics: 30 Days to Financial Fitness." Those with
marginal credit will most often get offers for secured cards,
requiring a deposit equal to or more than the total amount of credit
desired. "And then they still charge an arm and a leg on top of that,"
he adds.
Experts say the best bet is to research, research and research.
Offers found online -- through basic searches such as "bad credit"
and "compare credit cards," for example -- won't be touting their
high interest rates and fees or low credit limits. But they "seem
pretty straightforward about what the requirements are," says
George Yacik, vice president of SMR Research Corp., which has
conducted studies on the U.S. credit card industry.
While specific offers change often, here are a few lenders that have
issued unsecured credit cards to consumers with poor or little
credit:
Unsecured credit card issuers
• Columbus Bank and Trust
• First Premier Bank
• HSBC Bank of Nevada
Research may even reveal a card that offers rewards for purchases
or online bill payment options, which have traditionally only been
offered to those with decent credit but are becoming a bit of a trend
at the lower end of the market, Davidson says.
Reading carefully
With any offer uncovered, just heed the fine print (which Mills says is
more like "unread print"). One of those terms, for example, may
state the issuer's right to raise the interest rate if the customer is
even one day late on one payment, Krawczyk says.
The terms of any credit offer must be disclosed. "If you have less
than perfect credit, it's even more important to read those
disclosures carefully," says Detweiler.
What you find in the fine print of many offers can make your
neighborhood bank seem like the most desirable lender. "Everyone
focuses on the major card issuers. But if you're just starting out and
you already have a relationship with a bank, with a checking or
savings account, ask about their credit products," Mills says.
The big lenders, which have set rules and policies, know only what's
on your credit report. A local bank may be able to see a more
favorable side to your money handling, such as your avoiding
overdrafts and using electronic payment options successfully.
"Carefully select who and what you trust," advises Adam K. Levin,
president and CEO of Credit.com, who is also the former consumer
affairs director for the state of New Jersey. And never
underestimate how quickly you can use the system to build a
positive credit score. "If you play your cards right, it's really easy to
have good credit," he says. "Although it gets kind of demonized, the
system really is working in the consumer's favor a lot of times."
Melissa Ezarik is a Connecticut-based freelance writer.
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