Credit for the un-creditable

To get the best deals and make the most of modern technology, such as buying over the internet, a credit card is an essential that many people take for granted. But for some people with a low credit score, getting approved isn’t that easy

Despite the recession being over, many lenders are still operating a cautious approach and anyone who has had debt difficulties in the past or has missed a few payments will find it difficult to get a credit card from most sources.

However, for those who want the convenience of paying with plastic, it is often possible to get approved on bad credit credit cards without too much of a problem.

As these kind of cards accept individuals that have been assessed as being higher risk, the interest rate is higher – considerably so – and has led to criticism that those that can least afford it are being charged the most.

So, is it ever a good idea to take out a bad credit credit card or are these best avoided at all costs?

Having a credit card in your wallet undoubtedly gives you options that are not available to you when operating with just cash, especially as checks are accepted in fewer and fewer places now.

Having a card provides greater security, as if it is stolen, you can simply ring and cancel it, unlike losing a wad of cash. It is also convenient, allowing unplanned purchases without having to make a detour to the cash point, as well as allowing access to online sales that often offer goods at a discount.

So, without question, there are advantages to having a credit card, but do these benefits really outweigh the hefty interest that is payable on this type of account?

The short answer is no, but that shouldn’t deter you from owning a credit card as with some careful planning, a high interest card can actually save you money in the longer term.

The most important factor is to ensure that you pay off your balance in full each month, If you don’t think you can do this, then you should think very carefully about taking out a high interest card, because charges can mount up very quickly.

However, if you repay the balance in full each month, in other words treat the card more like a checking account than a credit facility, you will never pay any interest on your purchases.

More importantly, by running a credit card account well, you will earn valuable points on your credit file, making it increasingly likely that you will ultimately qualify for a mainstream credit card with a lower rate of interest, a considerable saving.

It is rather ironic that in order to repair a bad credit history you must take out further credit, but there is no other way to demonstrate that you are a good risk and will repay the money due on time.

For those who need to borrow money, high interest credit cards are generally a bad idea, as the balance can easily spiral out of control, especially if only the minimum payment is made each month.

In these cases, it can be a better idea to think about a loan, which are also available for those with bad credit. While these too tend to charge extortionate rates of interest for applicants with a low credit score, the advantage is that the repayments are fixed and the balance will not increase.

Bad credit credit cards are not a good idea for everyone, but for those looking to repair their credit file whilst enjoying the benefits of paying by plastic, they can be an option worth considering.

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